[Senate Hearing 115-214]
[From the U.S. Government Publishing Office]
S. Hrg. 115-214
ANTICIPATED NOMINATION OF
STEVEN TERNER MNUCHIN
=======================================================================
HEARING
before the
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
on the
ANTICIPATED NOMINATION OF
STEVEN TERNER MNUCHIN TO BE SECRETARY OF THE TREASURY
__________
JANUARY 19, 2017
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Finance
______
U.S. GOVERNMENT PUBLISHING OFFICE
29-928-PDF WASHINGTON : 2018
COMMITTEE ON FINANCE
ORRIN G. HATCH, Utah, Chairman
CHUCK GRASSLEY, Iowa RON WYDEN, Oregon
MIKE CRAPO, Idaho DEBBIE STABENOW, Michigan
PAT ROBERTS, Kansas MARIA CANTWELL, Washington
MICHAEL B. ENZI, Wyoming BILL NELSON, Florida
JOHN CORNYN, Texas ROBERT MENENDEZ, New Jersey
JOHN THUNE, South Dakota THOMAS R. CARPER, Delaware
RICHARD BURR, North Carolina BENJAMIN L. CARDIN, Maryland
JOHNNY ISAKSON, Georgia SHERROD BROWN, Ohio
ROB PORTMAN, Ohio MICHAEL F. BENNET, Colorado
PATRICK J. TOOMEY, Pennsylvania ROBERT P. CASEY, Jr., Pennsylvania
DEAN HELLER, Nevada MARK R. WARNER, Virginia
TIM SCOTT, South Carolina CLAIRE McCASKILL, Missouri
BILL CASSIDY, Louisiana
Chris Campbell, Staff Director
Joshua Sheinkman, Democratic Staff Director
(ii)
C O N T E N T S
----------
OPENING STATEMENTS
Page
Hatch, Hon. Orrin G., a U.S. Senator from Utah, chairman,
Committee on Finance........................................... 1
Wyden, Hon. Ron, a U.S. Senator from Oregon...................... 4
CONGRESSIONAL WITNESSES
McCarthy, Hon. Kevin, a U.S. Congressman from California......... 8
Hensarling, Hon. Jeb, a U.S. Congressman from Texas.............. 9
ADMINISTRATION NOMINEE
Mnuchin, Steven Terner, Secretary-Designate, Department of the
Treasury, Washington, DC....................................... 12
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Casey, Hon. Robert P., Jr.:
Submissions for the record................................... 99
Hatch, Hon. Orrin G.:
Opening statement............................................ 1
Prepared statement with attachments.......................... 102
Hensarling, Hon. Jeb:
Testimony.................................................... 9
McCarthy, Hon. Kevin:
Testimony.................................................... 8
Menendez, Hon. Robert:
Submissions for the record................................... 129
Mnuchin, Steven Terner:
Testimony.................................................... 12
Prepared statement with attachment........................... 134
Biographical information..................................... 139
Responses to questions from committee members................ 151
Wyden, Hon. Ron:
Opening statement............................................ 4
Prepared statement........................................... 256
Communications
Computing Technology Industry Association (CompTIA).............. 261
Jones, Mike...................................................... 262
Meade, Erica Helm................................................ 263
Tomassone-Bach, Jan.............................................. 263
(iii)
ANTICIPATED NOMINATION OF
STEVEN TERNER MNUCHIN
----------
THURSDAY, JANUARY 19, 2017
U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 10 a.m.,
in room SD-215, Dirksen Senate Office Building, Hon. Orrin G.
Hatch (chairman of the committee) presiding.
Present: Senators Grassley, Crapo, Roberts, Enzi, Cornyn,
Thune, Burr, Isakson, Portman, Toomey, Heller, Scott, Cassidy,
Wyden, Stabenow, Cantwell, Nelson, Menendez, Carper, Cardin,
Brown, Bennet, Casey, Warner, and McCaskill.
Also present: Republican Staff: Chris Campbell, Staff
Director; Mark Prater, Deputy Staff Director and Chief Tax
Counsel; Nicholas Wyatt, Tax and Nominations Professional Staff
Member; Tony Coughlan, Tax Counsel; Preston Rutledge, Tax
Counsel; Jeff Wrase, Chief Economist; and Lindsay Steward,
Detailee. Democratic Staff: Joshua Sheinkman, Staff Director;
Tiffany Smith, Chief Tax Counsel; Michael Evans, General
Counsel; Daniel Goshorn, Investigative Counsel; Elizabeth
Jurinka, Chief Health Advisor; Ian Nicholson, Investigator; and
Jayme White, Chief Advisor for International Competitiveness
and Innovation.
OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM
UTAH, CHAIRMAN, COMMITTEE ON FINANCE
The Chairman. The committee will come to order.
Welcome to everyone to this morning's hearing. We will
discuss the nomination of Mr. Steven Mnuchin to serve as
Secretary of Treasury for the incoming Trump administration.
And I want to officially welcome Mr. Mnuchin to the Finance
Committee. I certainly appreciate your willingness to appear
before us here today and to serve in this important position.
The position of Treasury Secretary is among the most
important in the executive branch. The next Treasury Secretary
will be asked a lot of questions that are going to be very,
very important here today. We are going to be talking about
advancing policies that will improve our Nation's economic and
fiscal outlook.
This position oversees both the collection of taxes and the
management of our debt. And in addition, as Congress works to
reform our Nation's tax code and fix our broken health-care
system, it is absolutely essential that we have a cooperative
partner overseeing Treasury. That is, quite frankly, something
that has been missing for the past 8 years as the Obama
Treasury has become increasingly opaque and nonresponsive to
inquiries and communications from members of Congress.
So, as we consider Mr. Mnuchin's nomination, ensuring that
both Congress and the incoming administration are committed to
sharing information and communicating on policy will be among
my top priorities. And in that regard, I believe the President-
elect has selected a nominee who will provide a clear channel
of communication and be willing to work with Congress on these
all-important efforts.
We discussed, coming over here, that he is going to need to
work very closely with members of this committee, and he has
committed to do so.
Another priority for me will be the advancement of pro-
growth trade policies. While USTR is the principal agency for
international trade policy, Treasury plays a key role in
several important areas, including the development of
international investment agreements and oversight of Customs'
revenue functions.
As the new administration comes in, I want to make sure,
first and foremost, that our trade policies do no harm.
Proposals to, for example, impose unilateral import tariffs as
a key tool of international economic policy need to be
carefully evaluated to ensure they do not hurt us at home.
In addition, I want to make sure that any new trade
agreements establish the highest standards for U.S.
stakeholders consistent with the Trade Promotion Authority
statute enacted in 2015.
Finally, I expect you to engage in much better
consultations with the committee regarding U.S. trade policies
than we have had under President Obama.
I look forward to a productive conversation about these
issues today and in the coming months. Objectively speaking, I
do not believe anyone can reasonably argue that Mr. Mnuchin is
unqualified for this position.
He has 3 decades of experience working in the financial
sector in a wide variety of capacities. He has been a leader
and a manager throughout his career, demonstrating an ability
to make tough decisions and to be accountable. And he has a
reputation of being a problem-solver and an excellent
communicator. Indeed, we have heard from numerous organizations
and associations in a wide variety of industries all expressing
their admiration of Mr. Mnuchin and their support for his
nomination.
Put simply, if the confirmation process focused mainly on
the question of nominees' qualifications, there would be
little, if any, opposition to Mr. Mnuchin's nomination.
Unfortunately, that is not the world we are living in.
Today, we are in the midst of an unprecedented effort to
stall and prevent confirmation on the Cabinet nominations of an
incoming President. It is disappointing that we have taken this
turn in the Senate where the minority openly and in so many
words is committed to obstructing nominees to positions across
the board, in many cases knowing full well that they cannot
prevent the outright confirmation of nominees at all.
My colleagues sometimes are content to unfairly and, in
some cases, maliciously malign, more or less, every nominee
before they can assume their post. I hope that is not true of
our Senate Finance Committee members here today.
With regard to Mr. Mnuchin's nomination, we have seen quite
a bit of consternation over the process and the timing of
hearings. We have heard demands that we convene additional
panels of witnesses, a step that has no precedent in the modern
history of this committee. There was even a, quote, ``mock
hearing'' on this nomination yesterday, held outside of the
committee, focused on issues that are essentially unrelated to
Mr. Mnuchin's qualifications.
Let me be clear. While my colleagues may believe that
nominees in the incoming administration should be treated
differently than those of any previous administration, on this
committee we have followed the same vetting and hearing process
that has been in place for decades and applied to both
Republicans and Democrats alike.
With regard to the substantive arguments being made in
opposition to Mr. Mnuchin, I am hesitant to go into too much
detail before giving the nominee a chance to refute any
accusations that have been made. That said, I do want to note a
few simple facts.
First, no one has credibly alleged that any laws,
regulations, or industry standards were violated by companies
run by Mr. Mnuchin. On the contrary, speaking of the main set
of allegations regarding the foreclosure practices of OneWest
Bank, all independent evaluations of the company's actions have
resulted in high marks. This includes reviews by the FDIC
Inspector General and the Department of Treasury.
Second, any claims that Mr. Mnuchin's businesses
contributed to the housing and foreclosure crisis that
precipitated the financial collapse of 2008 are similarly
lacking in merit. Mr. Mnuchin had no involvement in the
mortgage market in the years leading up to the collapse. In
fact, it is my understanding that after purchasing IndyMac and
all of its toxic mortgage assets, Mr. Mnuchin's company offered
loan modifications to the vast majority of its delinquent
borrowers and was one of the very first institutions to make
offers to forgive portions of loan principal balances in order
to reduce foreclosures.
To that point, Mr. Mnuchin is joined by a guest today, Ms.
Faith Bautista, president and CEO of the National Asian
American Coalition and head of the National Diversity
Coalition. In those capacities, she worked with many homeowners
to work out loan modifications with OneWest Bank. She is here
today to support Mr. Mnuchin's nomination.
Finally, I will just note that those making claims that Mr.
Mnuchin's connection to the mortgage and banking industry is,
on its own, disqualifying, are conveniently forgetting that the
current Treasury Secretary's tenure at a major Wall Street bank
included overseeing business units that were sanctioned by the
SEC and others for practices that harmed innocent investors.
Yet when his nomination came before the Senate, this connection
to Wall Street and the financial crisis was deemed forgivable.
Like I said, I will let Mr. Mnuchin defend himself from the
specious lines of attack, which, given the lack of credibility
in the accusations, should not be too difficult for a man of
his talents.
For now, I simply hope that we can have a fair and open
discussion during the committee hearing this morning and during
the course of what will likely be a long hearing.
And I hope that, going forward, my colleagues will apply
the same standards, both in terms of process and policy
substance, that have applied to nominees in previous
administrations, including theirs.
Once again, I want to thank Mr. Mnuchin for being here
today. I look forward to hearing his testimony and look forward
to seeing what my colleagues have in mind with regard to their
questions of him.
With that, I will turn to my ranking member, Senator Wyden,
for his opening remarks.
[The prepared statement of Chairman Hatch appears in the
appendix.]
OPENING STATEMENT OF HON. RON WYDEN,
A U.S. SENATOR FROM OREGON
Senator Wyden. Thank you very much, Mr. Chairman.
And welcome to you, Mr. Mnuchin.
This is our first hearing in the 115th Congress, so there
is a bit of housekeeping.
First, congratulations to my friend, Senator Hatch, on his
selection to continue leading the committee on behalf of the
majority.
I also want to welcome our two new members, Senator
McCaskill and Senator Cassidy. We are lucky to have you both.
Now to the business at hand. Aside from the President,
there may be no individual with a tighter grasp on the levers
of our economy than the Secretary of Treasury. That has been
true since the days of Alexander Hamilton. When you read about
the nominee for Treasury Secretary, given all the power that
this position holds, you hope not to see phrases like
``foreclosure machine,'' ``redlining,'' ``offshore funds,'' and
``predatory lending.''
I am sure today's hearing is going to cover a wide range of
matters, whether it is Mr. Mnuchin's background and
qualifications or the incoming administration's policy agenda.
I am going to begin with a topic that cuts across all of these
matters, the truly disgusting inequity and abuse of America's
tax laws.
The tax code today is a tale of two systems. For wage
earners, like cops and nurses, there are not any special tax
dodges. The rules that apply to them are firm and involuntary.
Once or twice a month, their taxes come right out of their
paychecks, not cutting corners.
The rules are different for the powerful and the well-
connected. They have armies of lawyers and accountants at their
disposal. With the right advice, the most fortunate individuals
in our country can decide for themselves how much tax to pay
and when to pay it. So let us look at Mr. Mnuchin's history.
There is no clearer example than Mr. Mnuchin's hedge fund
setting up outposts in Anguilla and the Cayman Islands, an
action that can be explained only by the island's 0-percent tax
rate. It certainly was not for ease of commute or for the
infrastructure.
In Mr. Mnuchin's case, millions of dollars in profits from
Hollywood exports, like the movie ``Avatar,'' were funneled to
an offshore web of entities and investors.
When Mr. Mnuchin's bank was up for a merger that had the
potential to deliver a huge financial gain, a foundation he
chaired reportedly used tax-exempt dollars to fund an
astroturfing campaign pushing for the deal's approval. In the
public comment period of a potential merger, that is the
equivalent of stuffing the ballot box.
Mr. Mnuchin operates seven personal trusts, including one
known as a ``dynasty trust'' that will shield tens of millions
of dollars from taxes. In my view, if you look at our history,
our Nation wanted to reward merit, not to perpetuate dynasties.
Now, as a nominee for a Cabinet position, Mr. Mnuchin could
be in line for a special elective Federal tax deferral on money
made by selling stocks and bonds. This is the very definition
of getting to pay what you want when you want.
Now, there is a common answer when these kinds of tax
tricks come under a spotlight. It is said that people who use
them are just following the laws on the books, and that might
be true. The outrage in tax law is what is legal and that every
member of the Senate has allowed it to stay legal. In my view,
this outrage is going to change only when taxpayers are no
longer divided into two very different sets of tax rules.
Now, this provides a segue to the important policy
questions. Setting aside Mr. Mnuchin's finances and background,
the tax reform agenda already being advanced by the President-
elect would perpetuate and, in fact, worsen the unfairness in
the tax code.
On the campaign trail, the President-elect delivered lots
of tough talk about fixing the tax system. He said he alone
could fix it, because he had spent a career using the system to
his advantage. As for the details, the few position papers that
were put forward did not get a whole lot of attention outside
the business pages. But after Mr. Mnuchin's nomination was
announced, he laid down a clear and specific marker. So I will
quote Mr. Mnuchin directly: ``Any reductions we have in upper-
income taxes would be offset by less deductions, so there would
be no absolute tax cut for the upper class.'' Let me repeat
that, and for the sake of brevity I am going to start calling
it the Mnuchin Rule: ``No absolute tax cut for the upper
class.''
So let us take stock of what is already happening on
Capitol Hill. The first major act of the unified Republican
government, repealing the Affordable Care Act, would
immediately violate the pledge of no tax cuts for the wealthy.
Bottom line, the ACA repeal scheme that was kicked off last
week is a Trojan horse of tax breaks for the most fortunate. It
is paid for by taking tax benefits for health insurance away
from millions of working people.
Then it is back for round two under an emerging Republican
plan to fast-track an even bigger tax break for the wealthy. In
my view, this is proof that the campaign promises about fixing
the tax system were pretty much a head fake.
For example, the President-elect said he would close the
carried interest loophole. It is a favorite of investment fund
managers, but his plan actually gives them a 25-percent tax
cut. In fact, it slashes tax rates for corporations and the
wealthy across the board at a cost of trillions of dollars, so
it sounds to me like the Mnuchin Rule is already on the ropes.
Now, what would the new administration's tax plan do for
people of more modest incomes? Millions of working parents,
mostly single, would get hit with tax increases because they
lose head-of-household status when they file. If you wanted to
write a tax plan that would push even more working-class folks
out of the economic winner's circle, that is how you would do
it.
Now, given how central tax policy is to our jurisdiction, I
hope the committee is able to discuss those issues today. But,
of course, the Treasury Secretary and this committee handle a
lot more than taxes, so there are other issues to raise.
On a broad level, it is my view that Senators need to make
a judgment call about what sort of person they want to head the
Treasury Department. Mr. Mnuchin's career began in trading
financial products that helped to bring on the housing crash
and the Great Recession. After nearly 2 decades at Goldman
Sachs, he left in 2002 and joined a hedge fund. In 2004, he
spun off a hedge fund of his own, Dune Capital. It was only a
few lackluster years before Dune began to wind down its
investments in 2008.
In early 2009, Mr. Mnuchin led a group of investors that
purchased a bank called IndyMac, and they renamed it OneWest.
Colleagues, OneWest was truly unique. While Mr. Mnuchin was
CEO, the bank proved it could put more vulnerable people on the
street faster than just about anybody else around.
While Mr. Mnuchin was CEO, a OneWest vice president
admitted in a court proceeding to robo-signing upwards of 750
disclosure documents a week. She spent less than 30 seconds on
each. And in fact, she shortened her signature to speed the
process along.
Investigations found that the bank frequently mishandled
documents and skipped over reviewing them. All it took to
plunge families into the nightmare of potentially losing their
home was 30 seconds of sloppy paperwork and a few haphazard
signatures.
These tactics were in use between 2009 and 2014, a period
during which the bank foreclosed on more than 35,000 homes.
``Widow foreclosures'' on reverse mortgages--OneWest did more
of those than anybody else.
Now, the bank defends its record on loan modifications, but
it was found guilty of an illegal practice known as ``dual
tracking.'' One bank department tells homeowners to stop making
payments so they can pursue modification, while another
department presses on and hurdles those folks into foreclosure.
OneWest made only two loans to African-American borrowers
in 2014 and 2015 according to an analysis by the California
Reinvestment Coalition. Just a fraction of its branches
occupied storefronts in minority communities; none were in
predominantly African-American communities, but minorities
still represented a disproportionately large share of the
people who were booted out of their homes.
Under Mr. Mnuchin, OneWest churned out foreclosures like
Chinese factories churned out Trump suits and ties.
And with the combination of extreme foreclosure tactics and
a bailout from the FDIC, OneWest became a rainmaker for Mr.
Mnuchin and his fellow investors. At precisely the same time
the foreclosure machine was running, OneWest funds were poured
into glamorous investments in Hollywood.
In 2012, OneWest struck an agreement to loan hundreds of
millions of dollars to a movie studio called Relativity Media.
In 2014, while he was CEO of OneWest's holding company, Mr.
Mnuchin bought his own stake in Relativity. He took a seat in
the boardroom, was appointed co-chairman; he even bought a
private jet with Relativity's co-founder. But the company
quickly tanked.
OneWest pulled out $50 million, emptying several Relativity
accounts, including one earmarked for building expenses that
expanded wages for contractors and tradesmen.
Mr. Mnuchin bailed out just before the studio declared
bankruptcy. There have been press reports that the FBI has
denied a Freedom of Information Act request concerning
Relativity Media on the grounds that disclosure is likely to
interfere with a pending law enforcement proceeding.
I have read the FBI background report on Mr. Mnuchin, and I
saw no discussion of any such enforcement action in the report.
That may be entirely appropriate.
Mr. Chairman, I want to continue to work with you to find
out what the enforcement proceeding cited in the Freedom of
Information Act denial is and how it relates to the nominee, if
it does at all.
For Mr. Mnuchin, Relativity Media's failure was not much of
a setback considering the profits that OneWest's foreclosure
machine was still pulling in. The purchase price of the bank
was less than $1.6 billion. After 5 years of foreclosures and
profits, it sold for $3.4 billion to CIT Group.
Now, outside OneWest and Relativity, Mr. Mnuchin spent
years as a director of the holding company for Sears, obviously
an iconic American brand. He served on the committee that
watchdogged the employee pension fund. The record shows that
that plan was routinely mismanaged and underfunded. Retirees
saw their pensions cut, losing a monthly health-care stipend
that was enough to offset roughly a third of the premiums the
seniors pay for Medicare Part B.
Sears also shuttered hundreds of stores nationwide over the
last few years and recently announced another round of
closures. Once again showing a truly impressive capacity to
advantage himself while others fell behind, Mr. Mnuchin joined
a small group of investors that spun off the company's real
estate into a separate trust. It was arguably the most valuable
asset Sears had left. So as retirees watched their pensions
shrink and Sears' remaining workers worried about an uncertain
future, this small number of powerful individuals made out just
fine.
Now, I am going to wrap up, and I just want to step back
for a moment to talk about the role of the Secretary of the
Treasury. This is the person who is going to have enormous
influence over Americans' paychecks and mortgages, the caliber
of job opportunities they face, the safety and stability of the
financial system that holds and invests their hard-earned
money, and much more.
This is a position that has the power to help reverse
decades of yawning inequality that has hollowed out the middle
class, dimmed the hopes of so many young people, and left
millions buried in debt. The Treasury Secretary ought to be
somebody who works on behalf of all Americans, including those
who still wait for the economic recovery to show up in their
communities.
When I look at Mr. Mnuchin's background, it is a real
stretch to find hard evidence that he would be that kind of
Treasury Secretary.
Now, just finally, Mr. Chairman, one other bit of
housekeeping. And I want to make it very clear that Democrats
have in no way been obstructing Mr. Mnuchin's confirmation. We
are doing our jobs to truly vet this nominee. We are, in fact,
colleagues, doing it as we have been doing it for almost 20
years on a bipartisan basis. And if you have any questions
about the fairness of it, ask Tim Geithner about what it was
like in 2009.
And I want to point out that at your request, Mr. Chairman,
I agreed to shorten the normal 1-week notice period to the
public so that Mr. Mnuchin's hearing could be held today.
Ultimately, nomination hearings are about hearing what the
nominee is for. So, Mr. Mnuchin, that is what today is all
about. We look forward to your testimony.
I note also we have a couple members of the House here, and
we want to welcome them as well.
The Chairman. Well, thank you, Senator.
[The prepared statement of Senator Wyden appears in the
appendix.]
The Chairman. We are pleased to welcome two of our
distinguished colleagues from the House of Representatives.
First we will hear from Representative Kevin McCarthy, the
House majority leader, then we will hear from Representative
Jeb Hensarling, chairman of the House Financial Services
Committee.
So, Leader McCarthy, please feel free to proceed with your
introduction, and then we will go to Mr. Hensarling and then we
will go to the nominee.
STATEMENT OF HON. KEVIN McCARTHY,
A U.S. CONGRESSMAN FROM CALIFORNIA
Representative McCarthy. Well, Chairman Hatch, Ranking
Member Wyden, and the members of the committee, I am proud to
be here today to introduce an extremely capable investor,
banker, financier, and a fellow Californian, Steve Mnuchin, the
nominee to be the next Secretary of the Treasury for the United
States.
The Secretary of the Treasury is a distinguished office,
once held by luminaries of our history, from Alexander Hamilton
to Andrew Mellon. It is an office that requires deep technical
skill, strategic vision, and uncommon instincts, all qualities
that Steven possesses and has demonstrated in the private
sector.
With decades of experience in banks, financial firms, and
even movie production, he has a history of growing returns and
achieving financial stability for his clients and shareholders.
I think it says a lot about this man that he would leave
such a successful career to apply his talents for the benefit
of the American people as a whole. Steven is a patriot and an
independent thinker, and America is in great need of such
capable leaders. I believe our Nation is enriched when we have
people serving in government who have spent their life serving
outside of government.
I know Steven shares with us here in Congress two
fundamental priorities: to enable an economy that creates
meaningful and good-paying American jobs, and to improve
economic security for the American people.
He understands that government does not create jobs, but
government can create the structure and incentive for broad
economic growth that benefits all at the expense of none. To do
this, we have to rethink the way our country taxes, regulates,
and trades.
He shares with Congress the goal of a pro-growth tax plan
that makes tax rates fairer and encourages businesses to hire
workers here in America. He knows firsthand the devastating
impact of irresponsible financial regulations that stifle
national and local lenders alike, impede small-business
creation, and drag down job creation. And he will work with
President Trump and Congress to promote a trade policy that
benefits American workers and consumers.
But if broad economic growth for the American people is our
top goal, it is not our only goal. Prosperity means little if
it can all be lost in another financial crisis. The American
people must have the complete assurance that their government
is doing everything within its power to make sure the financial
crisis that happened in 2007 and 2008 never happens again.
As Secretary of Treasury, Steven will work to defend the
integrity of the American people's retirement accounts, will
fight for the creation of not just good-paying jobs, but secure
jobs, and will work for economic stability so that people's
investments in their homes and elsewhere are secure.
So I thank you, Chairman Hatch, Ranking Member Wyden, and
the entire committee, for this opportunity to introduce you to
Steven Mnuchin.
I hope the committee and the Senate as a whole will give
thoughtful consideration to this accomplished and qualified
nominee for the Secretary of Treasury.
The Chairman. Well, thanks, Leader McCarthy. We appreciate
having you here, and we appreciate the hard work you do over in
the House.
Let's go to Congressman Hensarling.
STATEMENT OF HON. JEB HENSARLING,
A U.S. CONGRESSMAN FROM TEXAS
Representative Hensarling. Chairman Hatch, Ranking Member
Wyden, and distinguished members of the committee, it is an
honor to appear before you today to speak in support of Steven
Mnuchin's confirmation as Secretary of the Treasury.
President-elect Trump has outlined a bold and forward-
looking agenda to tackle the very serious problems that face
hardworking American families, families who have seen their
paychecks stagnate, their savings shrink, and their dreams
diminished.
To implement this agenda, the President-elect has chosen a
roster of very impressive citizens to serve in his Cabinet.
Each of these individuals has achieved incredible success in
their chosen field and are among the Nation's most respected
leaders in business, in the military, and in public service.
Each one of them is clearly committed to the President-elect's
vision of an America that is stronger, safer, more prosperous,
and teeming with opportunity, and an America where Washington
is truly accountable to We, the People.
It is the most impressive and qualified list of Cabinet
nominees in memory. And I believe President-elect Trump was
right to include Steven Mnuchin in this select list.
As we confront America's economic challenges together, Mr.
Mnuchin's very successful background in investment banking,
retail banking, and business will not only be vital to the
incoming administration, but to those of us who serve in
Congress as well. He understands the urgent need to increase
jobs, incomes, and opportunity, and has the critical experience
necessary to help do just that.
He knows all too well that this economy simply is not
working for working Americans. Nearly 8 years after the last
recession ended, Americans are still stuck in the slowest
recovery in generations; 301,000 manufacturing jobs disappeared
in the last 8 years.
To get our economy back on track with sustained growth and
higher incomes, Mr. Mnuchin knows Washington must give all
Americans more freedom, the freedom to save, the freedom to
invest, the freedom to innovate, so they can dream big and
pursue those dreams. I have no doubt Mr. Mnuchin is ready and
capable to hit the ground running and work as a partner with
Congress on President-elect Trump's pro-growth, pro-jobs
agenda.
I have had the opportunity to meet and speak with Mr.
Mnuchin on several occasions about the Trump administration's
plans for fundamental pro-growth tax reform, for banking and
capital markets reforms that work for all, and other vital
items on the
President-elect's agenda. I am deeply impressed by his
knowledge, his talent, and his commitment to work with Congress
on these priorities.
The Secretary of Treasury's responsibilities are
formidable, as we all know. As you may know, Albert Gallatin,
who served as Treasury Secretary for Presidents Thomas
Jefferson and James Madison, once said, quote, ``The place of
the Secretary of Treasury is more laborious and responsible
than any other.''
I have every confidence that Steven Mnuchin is up to the
job. But far more importantly, the man who will be our
President in a little more than 24 hours has every confidence
that Steven Mnuchin is up to the job.
The American people have now entrusted President-elect
Trump with the Oval Office. The election is over and should not
be relitigated now. That both disserves and disrespects the
American people. With the advice and consent of the Senate, the
President-elect should be able to surround himself with
honorable, accomplished, and talented men and women of his
choosing to serve in his Cabinet. In this vein, he has wisely
chosen Steven Mnuchin for the position of Treasury Secretary.
Now as the Senate fulfills its constitutional duty to
advise and consent, I do not offer advice since, as a House
member, I am not all that fond of receiving your advice.
[Laughter.]
But I do remain hopeful that in the finest traditions of
this body, the questioning of Mr. Mnuchin will be fair and
focused on his experience and his ability to fulfill the duties
of Treasury Secretary and to carry out the President-elect's
agenda. I ask you to recognize the impressive qualifications he
brings to the office and confirm him without delay.
Thank you, Mr. Chairman.
The Chairman. Well, thank you, Mr. Hensarling. We
appreciate both of you coming. We know you are really busy over
in the House of Representatives, but to come here and testify
for Mr. Mnuchin, I am sure he appreciates it, as do all of us.
Senator Roberts has to leave, so he is going to take less
than 2 minutes. And I am going to turn to him before I start
asking any questions.
Senator Roberts?
Senator Roberts. Thank you, Mr. Chairman. I will try to
wrap this up very quickly.
Mr. Mnuchin, if you are confirmed, will you pledge to work
with this committee to implement systems, controls, and
procedures to make sure the tax collection agency of the
Federal Government can never again be used as a weapon against
any political opponents of any presidential administration?
Mr. Mnuchin. Yes, Senator, I absolutely pledge to do that.
Senator Roberts. I have quite a few pass-through companies
in Kansas that are very interested with regards to your views
on tax reform. We could probably talk about that later in the
interest of time.
And then I just have an observation. I think that to date--
Mike, what have you done with my--here it is.
Senator Wyden, I have a Valium pill here that you might
want to take before the second round. Just a suggestion, sir.
Senator Wyden. Just another suggestion: we have a lot of
colleagues waiting; if you could be brief, it would be helpful.
Senator Roberts. I am going to be very brief.
Mr. Mnuchin, from the distinguished ranking member's
remarks, I understand you were in charge of the Great
Recession----
Senator Brown. Mr. Chairman, Mr. Chairman, I hope that that
comment about Valium does not set the tone for 2017 and this
committee. I like Senator Roberts, but I just cannot quite
believe that he would say that to the distinguished Senator
from Oregon.
Senator Roberts. I said that to the President of the United
States at one point.
Senator Brown. Perhaps you did.
Senator Roberts. Yes.
Senator Brown. But I would hope that that does not set the
tone for this session.
The Chairman. All right, all right.
[Cross talk.]
Senator Brown. Mr. Chairman, Mr. Chairman, I sit on the
Agriculture Committee----
The Chairman. Order! Order!
Senator Roberts. I have the time, please.
Senator Brown [continuing]. And the relationship we are
building is so different from that. I mean, this is just
outrageous.
Senator Roberts. I have the time, please.
The Chairman. Listen, you----
Senator Roberts. I do not know about outrageous, but I
think just a little pinprick of humor might help this committee
from time to time, which I engage in. And I appreciate the
gentleman's contribution with regards to the Agriculture
Committee. And he is a good member of the committee. We work
together on the Ethics Committee. So I am sorry if I have, you
know, incurred your wrath, sir. So we will be all right.
The Chairman. Well, let us start----
Senator Roberts. All right. The pass-through things on tax
reform----
Senator Wyden. Mr. Chairman, we have many colleagues
waiting----
Senator Roberts. Fine, Ron. I am done. Thank you.
The Chairman. All right. Mr. Mnuchin, we will take your
statement at this point.
STATEMENT OF STEVEN TERNER MNUCHIN, SECRETARY-
DESIGNATE, DEPARTMENT OF THE TREASURY, WASHINGTON, DC
Mr. Mnuchin. Thank you very much. Chairman Hatch, Ranking
Member Wyden, and members of the committee, it is an honor to
appear before you today. I am grateful and humbled by
President-elect Trump nominating me to serve as Secretary of
the Treasury. It is truly an honor and a privilege to be
considered for this position.
Thank you to all the members I have already had an
opportunity to meet with during this process. I enjoyed meeting
with you and learning more about the issues that are important
to you. For those few members whom I did not get a chance to
meet with, if confirmed, I look forward to meeting with you as
well.
I would like to thank Chairman Hatch and his staff for
taking so much time to work with me and support me through this
process. In addition, I would like to introduce my fiance,
Louise Linton, and my children, Emma, J.P., and Dylan, who are
here with me today, and thank them for their unwavering
support.
I would also like to introduce my brother, Alan Mnuchin,
and his wife, Alessandra, and my father, Robert Mnuchin, who
has always supported me and taught me that hard work,
determination, and the ability to bring people together can
make anything possible.
I would like to acknowledge my late mother, Elaine Terner
Cooper, who was an inspiration to me. I would also like to
acknowledge my grandparents, Emanuel and Mathilda Terner, who
were also a tremendous influence in my life.
My grandfather was a first-generation American whose father
emigrated from Europe. He truly embodied the American dream. He
started out blowing glass bottles by hand and later built
Midland Glass into one of the largest glass manufacturing
companies in the United States, with five factories employing
thousands of workers. My first job ever was in his factory when
I was in high school. It was there that I first learned the
importance of humility, hard work, and commitment.
For those of you who do not know my background, I studied
economics at Yale University. At the age of 22, after
graduating from Yale, I got a job at Goldman Sachs, where I
spent the next 17 years. I started on a folding chair in the
mortgage department. Nine years later, after many sleepless
nights, I was put in charge of mortgages, U.S. Government
bonds, and municipal securities.
Several years after that, I worked directly for future
Secretary of the Treasury Hank Paulson as the firm's chief
information officer. In that role, I oversaw 5,000 people and a
$1-billion budget.
While at Goldman Sachs, I learned the importance of the
financial markets in providing liquidity and capital to
businesses, governments, and consumers. A few years later, I
decided to leave Goldman Sachs to build an investment business.
After working briefly at ESL Investments, I started my own
investment business, Dune Capital Management.
Throughout my career, my commitment was to my clients and
shareholders, for whom I worked tirelessly to get the best
results. Thirty years later, my commitment is now to the
American people, for whom I will work tirelessly by helping to
grow our economy and create jobs.
I am eager to share with you why I believe I will serve
well as America's next Secretary of the Treasury. But first I
want to correct the record about my involvement with IndyMac
Bank.
Since I was first nominated to serve as Treasury Secretary,
I have been maligned for taking advantage of others' hardship
in order to earn a buck. Nothing could be further than the
truth.
During the summer of 2008, I saw the devastation that was
caused by the housing crisis when I watched people line up to
get their life savings out of IndyMac Bank. It was the middle
of the financial crisis and, despite the global panic, I saw a
way to save the bank. I applied for a banking charter and
submitted a bid to the FDIC for IndyMac. On December 31st, just
before midnight, we signed a binding agreement with the FDIC.
They later confirmed that our bid was almost $1 billion higher
than the next best bid.
We were willing to invest $1.6 billion into the most costly
bank failure ever to the FDIC deposit fund. We did this because
we believed in our ability to rebuild and create a successful
regional bank. We believed in recovery for the American
economy.
Let me be clear: my group had nothing to do with the
creation of the risky loans in the IndyMac loan portfolios.
When we bought the bank, we assumed these bad loans, which had
been originated by previous management. Some of those
individuals had to answer to Federal authorities for their bad
lending decisions.
We invested $1.6 billion into a failing financial
institution when most investors were running for the hills. We
renamed the business OneWest Bank and saved thousands of jobs.
We developed a prospering community banking franchise in
southern California as most banks were pulling back. Over the
next 2 years, we bought two more struggling banks from the
FDIC: First Federal of Santa Monica and LaJolla Bank, both
through competitive bidding. Combined, we had over 70 branches
and built a robust lending business, especially for small and
medium-sized businesses.
As chairman of the bank, I met with hundreds of business
people from all walks of life who were seeking loans to grow
their businesses and prosper. Like many banks at the time,
IndyMac, and its reverse mortgage division, Financial Freedom,
was unstable due to the large amount of distressed credit
mortgages in its portfolios. When we bought IndyMac, these
``legacy loans'' were included in the purchase. The
responsibility landed on me to clean up the mess others made
that we inherited.
We worked very hard to help homeowners remain in their
homes through modifications, wherever possible. Ultimately,
OneWest extended over 100,000 loan modifications to delinquent
borrowers to try to help them out of a bad situation.
I am proud of the fact that loan modifications started at
IndyMac under the leadership of the FDIC. However, the FDIC
loan modification program did not work for everyone. When the
FDIC took over IndyMac, they estimated that more than half the
foreclosures would not meet their test for a loan modification.
And they demanded many policy conditions: extend assistance to
sympathetic borrowers by establishing affordable and
sustainable payments by borrowers, increase the net present
value of cash flows to the owner of the loan, and stabilize
housing markets. My group had to adhere to servicing agreements
that limited our ability to make loan modifications that could
have helped more borrowers.
In the press it has been said that I ran a ``foreclosure
machine.'' This is not an accurate description of my role at
OneWest Bank. On the contrary, I was committed to loan
modifications intended to stop foreclosures. I ran a ``loan
modification machine.'' When we could do loan modifications, we
did them, but many times the FDIC, Fannie Mae, Freddie Mac, and
bank trustees imposed strict rules governing the process of
these loans.
I am proud to be able to say that our bank was able to do
over 100,000 loans modifications that allowed people the
opportunity to stay in their homes. Unfortunately, not all of
the homes were able to be saved through these programs, and
despite my best efforts, some were sadly subject to
foreclosure.
So sincere was my concern over this that in 2010 I
instructed my lawyers to sue HSBC, as trustee of the
securitized loans, to allow us to do loan modifications on
loans in mortgage trusts they oversaw. We won on summary
judgment and were consequently allowed to do more loan
modifications and keep more Americans in their homes.
Similarly, in 2015, when HUD issued Mortgagee Letter 2015-
11, I wrote HUD and asked them to change the policy so we did
not have to foreclose on senior citizens who were behind small
amounts of money on taxes and insurance. I was so troubled by
this that I discussed it with our primary regulator, the Office
of the Comptroller of the Currency. Unfortunately, HUD did not
agree, and we were forced to foreclose on senior citizens, even
if they only owed $1. Not complying with these HUD policies
would have subjected the bank to penalties and losses from HUD.
Despite our inability to save every home from foreclosure,
I am proud of the fact that OneWest Bank was the only one of 14
banks that was able to complete the independent foreclosure
review that was conducted by the OCC. Every one of the 175,000
borrowers who were in the foreclosure process during 2009 and
2010 were able to have an independent review of their loan. We
had a very low error rate, and independent government reviews
routinely showed that we had the most effective loan
modifications of any bank.
If we had not bought IndyMac Bank, the bank would likely
have been broken up and sold in pieces to private investors,
where the outcome for consumers could have been much more
bleak. Overall, I helped many homeowners stay in their homes
and escape financial ruin through my management of OneWest
Bank.
My experience confirmed that we must identify and eliminate
unwise and burdensome policies which contributed to the
disastrous outcomes that came in the wake of the financial
collapse.
Many Americans are still suffering from the disastrous
ripple effects the 2008 crisis had on our Nation. Faithfully
ensuring this does not happen again means supporting careful
oversight of a financial system which prioritizes the needs of
everyday Americans over the wishes of financial institutions or
the Federal Government.
I felt great empathy for the millions of hardworking
American families who lost their homes because the system
failed them. If confirmed as Treasury Secretary, I will work
diligently and compassionately for the American people so that
we never endure anything like the meltdown of 2008 ever again.
I was deeply honored when Donald Trump asked me to join his
campaign as Finance Chairman. I had the opportunity to travel
with him and hear firsthand from hardworking Americans about
their concerns for the American economy. Over the last year, I
visited over 50 cities in 26 States.
I remember attending my first rally with him in
Indianapolis. It was an unforgettable experience. As we arrived
into the stadium packed with 20,000 people, I saw the
excitement that people had for a Trump presidency.
On our trip to Flint, MI, I went with the President-elect
to visit the water treatment facilities and saw firsthand the
crumbling pipes and the devastation caused by that lead-tainted
water. We met with water engineers and saw the impact it had on
that community and the families that live there.
Across the country on my travels with the President-elect,
we heard the pained and heartbreaking stories of Americans who
had lost their jobs to workers in foreign countries. We heard
the concerns of people and small businesses burdened by high
taxes just trying to make ends meet.
In my meetings with you over the last month, you have
shared the concerns of your constituents, like farmers who
worry about the death tax wiping out the family farms, or
workers who are nervous about whether their retirement accounts
will be safe from ruin.
One of the greatest reasons I was drawn to President-elect
Trump's campaign was that it was predicated on a commitment to
stimulating prosperity for Americans of all backgrounds,
whether they live in the inner city of Detroit, rural North
Carolina, the coal country of Ohio or West Virginia, or any
place in between.
I share the President-elect's goal to economically empower
every citizen. We will not rest in our mission until that is a
reality.
Among the President-elect's signature issues in this
campaign was reviving trade policies that put the American
worker first. I will enforce trade policies that keep our
currency strong on the world exchanges and create and protect
American jobs.
We will also make America the best place for companies to
do business. Sensible regulation is a necessity for healthy
markets. However, I saw firsthand how regulatory excess can
inhibit lending by financial institutions, resulting in a lack
of access to capital for small businesses and entrepreneurs.
Alexander Hamilton remarked that the wealth of a nation may
be promoted by, quote, ``multiplying the objects of
enterprise.'' Hamilton knew the unique value of entrepreneurial
activity to a thriving economy. From our Nation's earliest
days, American businesses have been the greatest repository of
ingenuity and entrepreneurial spirit in the world. We need to
unleash that power to generate jobs and create abundance for
Americans of all backgrounds.
We will work diligently to limit regulations, lower taxes
on hardworking Americans and small businesses, and get the
engine of economic growth firing on all cylinders again.
In this age of unprecedented online attacks, we must also
be vigilant about cybersecurity. If confirmed as Secretary of
the Treasury, I will use my expertise in technology to protect
Americans' information at the IRS and keep our financial
architecture safe from malicious attacks.
I will use the Treasury Department's Office of Terrorism
and Financial Intelligence to stop the financing of terrorism.
I will partner with other government agencies in our shared
goal of allowing our financial markets to operate free from
digital and physical threats.
If I am confirmed as Treasury Secretary, I promise I will
work hard with this committee, all members of Congress, and the
administration to put forth policies that will help American
families reach and maintain prosperity. We will make America
great again.
Thank you, and I look forward to answering your questions.
The Chairman. Well, thank you, Mr. Mnuchin.
[The prepared statement of Mr. Mnuchin appears in the
appendix.]
The Chairman. Thank you, Mr. Mnuchin. We appreciate your
comments.
I have some obligatory questions that I ask all nominees,
that we do on this committee.
First, is there anything you are aware of in your
background that might present a conflict of interest with the
duties of the office to which you have been nominated?
Mr. Mnuchin. I am not. I have worked with the Ethics Office
and signed an agreement with them to dispose of all my
investments that could create any conflicts.
The Chairman. Do you know of any reason, personal or
otherwise, that would in any way prevent you from fully and
honorably discharging the responsibilities of the office to
which you expect to be nominated?
Mr. Mnuchin. I do not.
The Chairman. Do you agree without reservation to respond
to any reasonable summons to appear and testify before any duly
constituted committee of the Congress if you are confirmed?
Mr. Mnuchin. Absolutely. I look forward to it.
The Chairman. Finally, do you commit to provide a prompt
response in writing to any questions addressed to you by any
Senator of this committee?
Mr. Mnuchin. Well, I have provided over 5,000 pages to the
staff. I think I have the record of that, so I commit, if there
are any additional questions, I will respond to them promptly.
The Chairman. All right. I have to go outside here for a
minute, so, instead of my starting the question period, I am
going to turn to the ranking member, my partner in this matter,
and then I will ask questions when I come back.
Senator Wyden. Thank you very much, Mr. Chairman.
Mr. Mnuchin, Medicare finance is about taxes, and it would
be your responsibility, if confirmed. With the attempt to
repeal the Affordable Care Act, Medicare's solvency is
threatened. What steps are needed, in your view, to strengthen
this program that every senior in America relies on?
Mr. Mnuchin. Well, first of all, Senator, thank you very
much. And I very much appreciated the opportunity for us to
meet yesterday, and especially the opportunity to talk about
tax reform with you, which I think is very important.
I completely agree with you that Medicare is very important
and a very important program and that the safety of that is an
important issue. And if confirmed, that is something that I
look forward to working with your staff on to make sure that we
have the appropriate policies.
Senator Wyden. Now, if you are confirmed, Mr. Mnuchin, you
would be the managing trustee for Medicare. Now, would you not
like to offer something by way of discussion about what you
would be doing, if confirmed? This is an important part of the
job.
Mr. Mnuchin. Senator, I acknowledge that it is a very
important part of the job. And there are many parts of this job
that I consider myself an expert on and understand, and there
are certain parts of this job that, if confirmed, I will work
on diligently with this committee and others. And there is
obviously a significant staff. This is a very important issue.
And as I have said, I am committed to be very responsible in my
position there and make sure that I properly provide the
support from the Treasury Department. And I would take my
responsibility very seriously.
Senator Wyden. I will just tell you that without any
specifics on a matter that is so important that you would have
direct responsibility over, I find it very troubling that you
will not discuss Medicare. So let us go to terrorism financing.
The country is fighting ISIS and other terrorist groups.
The Treasury Department plays a key role in fighting this
battle. What would be your ideas on additional actions for
strengthening how the Department fights terror?
Mr. Mnuchin. Well, let me first say I strongly believe and
understand that there are very, very important tools within the
Treasury Department that can combat terrorism and that many of
these tools, such as sanctions, are extremely effective and
keep our armed services out of harm. So I am fully committed to
the maximum amount of law to both enforce the existing
sanctions in a very strict way, and I will work with the
President-elect as he sees fit on additional sanctions.
And there are also other programs within Treasury that I
believe are very, very effective in fighting terrorism. It is a
very important part of the Treasury. And I know that that has
been done very effectively under previous Secretaries.
Senator Wyden. We all agree it is important. What we are
trying to do is assess your qualifications. And you have not
been willing to talk about Medicare, you have not been willing
to talk specifics on terror.
Let me take one more crack on qualifications at the
Committee on Foreign Investment, because this is something else
as Treasury Secretary you would have responsibilities over, to
protect our country when a foreign investor makes an investment
in the United States in a way that has national security
implications.
If a foreign investor with ties to a foreign government
invests in President Trump's business, should the Committee on
Foreign Investment automatically and with close scrutiny
examine this transaction?
Mr. Mnuchin. Senator, first let me say ``yes,'' I think
that would be appropriate. But let me go back to your other
question, because I apologize if I did not answer the specifics
on your terrorism and sanctions question because----
Senator Wyden. I was searching for any specifics in order
to be able to assess your qualifications.
Mr. Mnuchin. Well, Senator, again, I believe there are some
very important sanctions. As it relates to the sanctions
against Iran and other countries, I would absolutely enforce
those, and I would encourage the President to use additional
sanctions when appropriate.
And I also understand there are certain classified programs
that I will be part of at the NSA and will also use that and
work with the national security group to the maximum amount as
available by law.
Senator Wyden. So we did not hear what you would do to
fight ISIS, we did not get any specifics on Medicare, so now
let us hear about this most current question with respect to
the Committee on Foreign Investment. What would you do if you
are dealing with President Trump's business?
Mr. Mnuchin. I would deal with President Trump's business
no differently than I would deal with any business that comes
before the committee, and I would take my role as Chair of that
committee very, very significantly.
I think it is a very important issue. I think perhaps
previous Secretaries have not enforced some of these things
necessarily as much as perhaps they should have in protecting
the American workers and the American people and American
technology.
I think this is one of the most important jobs that I would
have as Secretary of the Treasury.
Senator Wyden. Mr. Mnuchin, the President is not like
everybody else. He is the Commander-in-Chief, and any foreign
government involvement in his business could compromise
national security. So I am going to reflect on that answer as
well.
Can I pursue one other additional question, Mr. Chairman?
The Chairman. Yes, go ahead, but then I am going to----
Senator Wyden. Mr. Mnuchin, you ran a hedge fund for a few
years starting in 2004, and I have been trying to get my arms
around the Mnuchin web of bank accounts and shell companies.
They were in the Cayman Islands and Anguilla.
How many employees did you have in Anguilla?
Mr. Mnuchin. We did not have any employees in Anguilla.
Senator Wyden. How many customers did you have there?
Mr. Mnuchin. We did not have any customers that resided in
Anguilla.
Senator Wyden. Did you have an office there?
Mr. Mnuchin. We did not have an office ourselves there.
Senator Wyden. So you just had a post office box?
Mr. Mnuchin. Senator, let me explain to you----
Senator Wyden. It is just a ``yes'' or ``no'' answer. I am
already over my time. ``Yes'' or ``no,'' did you just have a
post office box?
Mr. Mnuchin. Well, hopefully the other Senators will defer
some time so I can answer this for you, because I think it is
an important issue. But no, we had----
Senator Cornyn. Mr. Chairman, Mr. Chairman----
The Chairman. I think he should go----
Senator Cornyn. This is not a trial.
The Chairman. I think you should go ahead and answer it
right now.
Senator Cornyn. He should have a chance to answer the
question.
The Chairman. Yes, it is a legitimate question. You go
ahead and answer it.
Mr. Mnuchin. All right. I, like all other hedge funds and
many, many private equity funds, set up offshore entities that
are primarily intended to accommodate nonprofits and pensions
that want to invest through these offshore entities.
As it relates to my own tax situation, these entities were
either taxed as U.S. corporations or U.S. partnerships. And in
no way did I use them whatsoever to avoid any U.S. taxes. They
were merely as an accommodation to pension funds and nonprofit
institutions and a small number of foreign investors.
And as Treasury Secretary, if I am confirmed, I would look
at these rules and make sure. I think that you did a good job
in stopping one of the abuses of offshore deferred fees, but I
would diligently look at these things. And I can assure you I
paid all my taxes as was required.
Senator Wyden. We will come back to this question of
offshore deals, or more commonly called ``blockers.'' Again, I
am very troubled about this question of how you are going to
unrig the system if you have a record of taking advantage of
tax shelters that, in effect, have a 0-percent tax rate.
Thank you, Mr. Chairman.
The Chairman. Well, Mr. Mnuchin, as you can see, you are
going to get questions like this. And what was legal at the
time is still being criticized.
But I am sure you have heard of allegations that you
profited from, quote, ``predatory lending'' during the housing
crisis. An investor group that you headed reformed IndyMac, a
failed institution responsible for many low- and no-doc
mortgage loans, into a viable institution called OneWest, which
you have described here, which offered loan modifications,
often above and beyond what other institutions were doing, to
more than 100,000 borrowers. At least that is the way it looks
to me.
Meanwhile, during all of the foreclosure turmoil, Obama
administration officials set up a national loan modification
program called HAMP--Home Affordable Modification Program. And
according to the SIGTARP, many members of Congress from both
sides of the aisle, and others, HAMP repeatedly fell far short
of its goals and had significant design flaws.
In testimony before Congress in 2011, then-SIGTARP--Special
Inspector General--Neil Barofsky identified that, quote,
``There have been countless published reports of HAMP
participants who end up worse off for having engaged in a
futile effort to obtain the sustainable relief that the program
promised. Failed trial modifications often leave borrowers with
more principal outstanding on their loans, less home equity,
depleted savings, and worse credit scores.''
Using provocative language that we have heard supporting
your actions in the foreclosure crisis, I guess you could say
that then-Treasury Secretary Geithner was a, quote, ``predatory
loan modifier,'' using that type of logic.
Now, Mr. Mnuchin, did OneWest have any interplay with the
Obama administration's HAMP program? And was that program
always successful in preventing foreclosures on struggling
American homeowners? Or could more have been done by the
administration?
Mr. Mnuchin. Senator, thank you very much for that
question. And that is a very important issue.
When we did the IndyMac deal with the FDIC, we committed to
the FDIC that we would continue the FDIC loan modification
program. It was after that that the Obama administration came
up with HAMP. And we had no obligation to do HAMP. We could
have continued to do FDIC loan modifications, but we felt it
was the appropriate thing to voluntarily go into the U.S.
Treasury HAMP program, as did other major banks. So we
voluntarily went into that program.
The HAMP loan modification program was a very proscriptive
program, including us having to follow net-present value
calculations that were determined by the Treasury models to see
which was better, either foreclosing on a home or providing a
loan modification. And to the extent that the net-present value
was higher on foreclosing, we unfortunately had to follow the
HAMP rules or we would have been severely penalized if we had
not proceeded with foreclosures.
The Chairman. Now, these were not your rules.
Mr. Mnuchin. No, they were not our rules, Senator. These
were rules that were driven by the administration under HAMP.
The Chairman. Which administration?
Mr. Mnuchin. The Obama administration.
The Chairman. Oh, I see; okay. Well, let me ask one more
question. There is a wide agreement that the tax law has become
much too complicated. When stories of people getting their tax
liability incorrectly calculated are commonplace, thus inducing
cynicism about the tax law, and thus creating an ever-greater
tax gap, or a difference between what is owed versus what is
actually paid, it is clear that there is a major problem and
something needs to be done to address the problem. Now, to your
credit, Mr. Mnuchin, you have talked about your desire to
simplify the tax code. Thank you. I am glad you are talking
about that, because I very much agree with you.
So my question to you, Mr. Mnuchin, is how to address this
problem. Do you have any suggestions for how to make the
Internal Revenue Code less complex, or at least keep it from
getting more complicated? And would you recommend a moratorium
on either tax legislation or tax regulations? And should the
tax law simply try to raise revenue for the government and stop
trying to achieve so many other societal goals?
Mr. Mnuchin. Yes, Senator, I agree with you completely. And
one of the things that has been a great honor is to travel with
the President-elect, and I have been one of the chief
architects of his economic plans.
And we believe the most critical issue is creating economic
growth, and passing tax reform is a major component of that.
And our tax reform plan--we believe that tax simplification and
fewer deductions are absolutely critical.
Now, you mentioned the tax gap, and that is something I
have been reading about and studying and is something that I am
actually quite interested in. I was particularly surprised in
looking at the IRS numbers, that the IRS headcount has gone
down quite dramatically, almost 30 percent over the last number
of years. I do not think there is any other government agency
that has gone down 30 percent, and especially not an agency
that collects revenues. This is something that I am concerned
about.
Now, perhaps the IRS just started with way too many people.
But I am concerned about the staffing of the IRS. That is an
important part of fixing the tax gap. And I am also very
concerned about the lack of first-rate technology at the IRS,
the issue of making sure that we protect the American public's
privacy when they give information to the IRS, the
cybersecurity around that, and also customer service for the
many hardworking Americans who are paying taxes.
The Chairman. Senator Grassley, you are next.
Senator Grassley. Like I told you when we met in my office,
I do not have any ``gotcha'' questions, or I would let you
know. So let me go along the line of the first statement I want
to make. I do not expect you to answer unless you have some
misunderstanding of our position discussed in my office.
Pro-growth tax reform will be a top priority for you. I
agree and look forward to working with you and President-elect
Trump on that point. As part of any tax reform proposal, it
will be important that adequate transition rules are included
to provide a smooth transition for businesses that may be
unpredictably negatively impacted.
As we discussed in our meeting, Congress has already
effectively put in place transition rules for some alternative
energies, including wind. The Production Tax Credit is
currently scheduled to phase out over the next few years,
ending in 2020. Based upon our conversation, I believe that we
are in agreement that you would support the current phase-out
as part of any tax reform proposal.
Question two. I have been a strong proponent of the IRS
private debt collection program, as has Senator Schumer. In
2015, Congress updated and made mandatory the IRS private debt
collection program. This program is designed to chip away at
the tax gap by requiring the IRS to contract with private debt
collectors to collect inactive tax debt owed. These are the tax
debts not being worked by the IRS and, absent this program,
would likely never be collected, adding up to $187 million in
2017.
Out of that $187 million, the Treasury Department has
provided debt collectors to collect a net of $8 million. This
certainly is not due to the lack of inactive tax debt available
for the IRS to assign. According to the Government
Accountability Office report, the IRS has over $130 billion of
outstanding debt on its books. So hamstringing this program by
refusing to release inactive debt for the program ought to be
considered unacceptable by anybody.
So can you give me assurances that the Department of
Treasury under your leadership will work to implement the
program to the full extent of authorized law and bring in this
tax money that is not being collected?
Mr. Mnuchin. Yes, Senator. And first of all, thank you for
having spent time with me. I appreciated the opportunity to
speak to you about a lot of important issues.
And on these issues, I absolutely agree with you that we do
need to have phase-out rules when we change things. And I
support the phase-out of that, as you have suggested.
And then on the IRS, I think that most aspects of taxes
should be handled by the IRS. But as you have described, to the
extent we have 100-and-plus billion dollars of receivables that
are just sitting there, and that we can collect tens of
millions or hundreds of millions of dollars for the American
public, particularly in an environment where we are looking for
money for so many programs, this, to me, I agree with you,
seems like a very obvious thing to do.
Senator Grassley. Yes. This will have to be my last
question. In 2006, I was successful in enacting legislation to
enhance the IRS whistleblower program. The program has been one
of the most effective programs in addressing tax evasion,
leading to the recovery of more than $3.4 billion in taxes that
would have otherwise been lost to fraud.
However, there has been resistance within the IRS to the
whistleblower program. An ongoing concern has been poor
communication with whistleblowers, who often wait in the dark
for years with no feedback from the bureaucracy.
Another concern is that the IRS has chosen to interpret the
whistleblower law narrowly, to the detriment of whistleblowers
in several instances. For example, the IRS has interpreted the
terms ``collected proceeds,'' which is the base for determining
the amount of an award, to exclude criminal penalties and
certain other proceeds, such as penalties assessed for
undisclosed foreign bank accounts.
Two questions, and I will state them both. Should you be
confirmed, can I count on you to be supportive of the
whistleblower program and work to ensure its success? And
additionally, would you be willing to review the IRS's
administration of the program, including its very narrow
interpretation of the words ``collected proceeds''?
Mr. Mnuchin. Absolutely, Senator, you have my assurance.
And let me further go on to say that the majority of Americans
voluntarily file their tax returns honestly. But we are all
aware that there is tax fraud and there is tax evasion, as you
have said, and we need to be diligent. And I believe that the
whistleblower laws are a very important part of that. So I will
work very hard with you on that. Thank you, Senator.
Senator Grassley. Thank you very much.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Stabenow?
Senator Stabenow. Thank you very much, Mr. Chairman.
And welcome. And congratulations on your nomination, and
welcome to your beautiful family as well.
I do want to follow up on information that we just received
last night that was in addition to your recent financial
disclosures. I have not had a lot of time to take a look at
that. We just received it last night.
But you failed to include your position as a director of a
Cayman Islands corporation as well as manager, chairman, or
director of seven additional shell corporations and holding
companies, nearly $100 million in real estate, as well as a
number of other things, including $906,000, $556,000 worth of
artwork held by your children--so a number of things.
As Treasury Secretary, and as we go into tax reform, would
you support closing tax loopholes in the U.S. tax code that
extremely wealthy people use, such as yourself, to avoid paying
taxes? We have heard about the Cayman Islands for years and the
buildings that have had thousands of companies that have used
them as addresses. Would you be willing to close those
loopholes?
Mr. Mnuchin. Well, first of all, let me just comment. I
very much appreciated the opportunity to meet with you. And I
have traveled to your State many times and have great
admiration for your State. The President-elect had a very
significant economic speech in Detroit, and we have been very
focused on time in your State. So I appreciate everything that
you have done there.
Let me just comment on--I realize last night you did get a
memo on some changes to my Senate questionnaire, so thank you
for giving me the opportunity to comment on that.
I think, as you all can appreciate, filling out these
government forms is quite complicated. There were many things I
expected in this job, including having to sell everything. But
the amount of paperwork and filling out the forms, even for me,
having experience in business, was quite a job.
In an effort to get the committee information early, we
submitted a preliminary questionnaire prior to us having the
278 form finished and prior to signing the agreement with the
Ethics Office, so let me first say any oversight was
unintentional.
You did mention that there was $100 million of real estate.
I was advised by my lawyer that we did not need to disclose
that on the questionnaire because it did not need to be
disclosed on the 278. There was some confusion about the
complexity.
We worked tirelessly with the committee staff. And I want
to thank all the staff. I know they worked very, very long
hours. As I said, they were extremely thorough, and I
appreciate their work. We delivered over 5,000 pages. And I can
assure you, they actually read all those 5,000 pages, because
when I had the opportunity to meet with the staff, with my
lawyers and accountants, we answered some very specific
questions and----
Senator Stabenow. Excuse me, Mr. Mnuchin, I do not want to
interrupt, but I have very limited time. And actually, I
appreciate the additional information and the clarification and
all that.
Mr. Mnuchin. Yes.
Senator Stabenow. But my question goes to what you were
actually disclosing and particularly the Cayman Islands. I
mean, did you use the Cayman Island corporation to avoid paying
taxes? Would you support closing tax loopholes that very
wealthy people have consistently used in the Cayman Islands to
avoid paying taxes? That really is my question.
Mr. Mnuchin. Well, let me just be clear. Again, I did not
use a Cayman Island entity in any way to avoid taxes for
myself. I paid U.S. taxes on all that income, okay? So there
was no benefit to me from the Cayman entity.
As I said, the Cayman entity was set up to accommodate
nonprofit and pension funds that wanted to invest through
offshore and a certain number of offshores.
Senator Stabenow. So you have helped others avoid paying
taxes.
Mr. Mnuchin. Again, I am not going to make a comment.
Again, they did not avoid--they followed the law. Because I
have experience as a hedge fund manager, I am committed to tax
simplification. I think it makes no sense that we would
encourage hedge fund managers to set up entities in the Cayman
Islands or Anguilla or anywhere else where, as you have pointed
out, I did not have any physical people.
This is not like--there are people who set up offshore
businesses and put all their people offshore, and you have
heard of inversions. And those types of things, you know, are
perfectly legal and hurt the American workers.
In the hedge fund world, these are all just set up to make
the accountants rich. And I would like to work with the IRS to
close these tax issues that make no sense and make sure that we
are collecting the proper amount of taxes.
Senator Stabenow. So you would support closing those
loopholes?
Mr. Mnuchin. I would support changing the tax laws to make
sure that they are simpler and more effective, yes.
Senator Stabenow. Thank you.
The Chairman. Senator Crapo?
Senator Crapo. Thank you very much, Senator Hatch.
And, Mr. Mnuchin, I appreciate your being here, your
willingness to go through this and to serve the American
people. We truly need the kind of vision that President Trump
has enunciated for the country and that you have committed to
help work with him to achieve for the country.
As a part of that, one of the things that you have already
mentioned today, and I am paraphrasing you here, but I believe
you said, in essence, that we have a regulatory excess in the
United States in many circumstances that can and is inhibiting
lending and inhibiting capital formation, two very important
things that I think are critical to a pro-growth economy.
Could you elaborate on that?
Mr. Mnuchin. Sure. Well, let me first say that I absolutely
believe in proper regulation. And before I had the opportunity
to put in a bid for IndyMac Bank, I had to be issued a charter.
And I worked very closely with what was the Office of Thrift
Supervision at the time. And by the way, I was a big fan of you
merging the OTS with the Office of the Comptroller of the
Currency and getting rid of another regulatory agency.
But at the time, I worked with the OTS and the Fed. And the
regulators explained to me at the time, and I told them that I
understood the responsibility of being given a banking charter.
I took that very, very seriously.
I must say that I enjoyed working with very, very smart
regulators. And I have tremendous respect for them.
As a matter of fact, one of the few nice things that The
Wall Street Journal actually wrote about me was, they made a
comment that I told everybody we had to treat the regulators
like our best client, which I believe. The regulators and the
relationships with them and following the regulations, nothing
was more important, given the trust they had put in us.
Having said that, I witnessed firsthand multiple
regulators: the OCC, the FDIC, the Consumer Financial
Protection Bureau, the Federal Reserve. In certain cases, there
was overlapping regulation.
My biggest concern--and I fully support regulation for
banks with FDIC insurance--but my biggest concern is that this
regulation is killing community banks. We are losing the
community banking business; we are losing the ability for small
and medium-sized banks to make good loans to small and medium-
sized businesses in the community where they understand those
credit risks better than anybody else. And I think we all
appreciate that the engine of growth is with small and medium-
sized businesses.
And in my role at the Finacial Stability Oversight Council
and working with the different regulators, I would make sure
that we did what we could to have proper regulation, but
eliminate overlap as well as make sure that the banks are
lending to small and
medium-sized businesses so we do not end up with a world where
we only have four big banks in this country.
Senator Crapo. Well, thank you, and you actually led right
into my next question. Because in a very closely related
matter, as you know, as the Secretary of Treasury you will have
a very important role as the Chairperson of FSOC. And in my
view, FSOC has focused very heavily on some of its statutory
mandates while ignoring others.
One of the statutory mandates that the Dodd-Frank Act
requires FSOC to do is to, and this is the statutory language,
``advise Congress and make recommendation in such areas that
will enhance the integrity, efficiency, competitiveness, and
stability of U.S. financial markets.''
To date, frankly, I am not aware of FSOC fulfilling that
role. We do not get a lot of advice from FSOC. We get a lot of
directive in the country.
Will you pledge, as the Chairperson of FSOC, that you will
ensure that the Council considers ways to make the U.S.
financial markets more efficient, and then advise and work with
Congress to achieve those outcomes?
Mr. Mnuchin. I absolutely will, Senator. And let me just
comment on, for instance, the Volcker Rule as an example. And I
do support the Volcker Rule. I think the concept of proprietary
trading does not belong in banks with FDIC insurance.
But the Federal Reserve just put out its own report that
the Volcker Rule has completely limited liquidity in many
markets. And the Federal Reserve is concerned that the
interpretation of the Volcker Rule does not allow banks to
create enough liquidity for customers. So that is something I
would absolutely want to look at.
And, Senator Wyden, by the way, I wanted to thank you, for
I am now in great esteem of having the Mnuchin Rule with both
the Buffett Rule and the Volcker Rule. I take that as a great
compliment, so thank you for putting me in with these other
great people.
The Chairman. Senator Nelson?
Senator Nelson. Good morning. I enjoyed our visit
yesterday.
Were you a director of Dune Capital International Limited,
a Cayman Islands corporation?
Mr. Mnuchin. I was. That is correct.
Senator Nelson. Did you move a hedge fund, Dune Capital
Partners, LLC to Anguilla?
Mr. Mnuchin. So, Senator, first let me just comment. When
we talk about moving, okay, you know, it is not as if I had 50
people sitting in offices, as we have talked about, and moving
them.
Senator Nelson. Right. I understand it. What was----
Mr. Mnuchin. I do want to comment. And yes, so Dune
Capital, LLC, which was our master fund--and not to get into
the nuances of this, but when one runs an onshore fund and an
offshore fund, there are certain efficiencies of keeping the
assets in what is called a master fund.
And because we set up the master fund in Anguilla, I was
required to change Dune Capital Partners to become a foreign
entity. So that was the reason for it.
But let me just comment----
Senator Nelson. Right. No, I am running out of time. I have
to get to the question.
Mr. Mnuchin. Right. Sorry.
Senator Nelson. The question is--both of those were, for a
tax consequence, located in the Caymans as well as Anguilla.
And so the question is--you said you support tax reform--do you
support closing those kind of tax-avoidance provisions, the
Anguilla- and the Cayman Islands-type tax avoidance in the tax
code?
Mr. Mnuchin. So let me just comment that when I did move
it, I had to apply to the IRS. And the IRS approved it as a
foreign entity eligible to be taxed as a U.S. partnership. So
from my standpoint, it made no difference to me whether it was
located in Delaware----
Senator Nelson. That is not my question.
Mr. Mnuchin. I am giving you a slightly longer answer. I
apologize; it is a complicated issue.
Senator Nelson. Can you just answer the question?
Mr. Mnuchin. The short answer is ``yes,'' as I have said
before. I think that I would work with the IRS and with
Congress, okay, as I have said. It makes no sense that we have
all these requirements to set up these offshore entities,
which, again, did not benefit me, but did benefit certain
nonprofits and pensions. And we should address the issues for
nonprofits and pensions and understand why they need to invest
through these offshore funds.
Now, I would not want to do anything that is detrimental to
the pension holders or these nonprofits, but I would commit to
work with your office, Senator, and make sure that we fix the
system.
Senator Nelson. All right. We talked about IndyMac Bank
yesterday and becoming OneWest. And you said you bought, when
you acquired IndyMac Bank, the portfolio of reverse mortgages.
And to your credit, you said that once it became OneWest that
you did not sell anymore reverse mortgages.
And yet, you, as the CEO--I want you to comment on the fact
that, of the reverse mortgages that you acquired from IndyMac
Bank, some of the folks were not treated very well.
I mentioned to you yesterday that a 90-year-old Lakeland
woman was foreclosed on because of a 27-cent payment error. I
did not mention two others: foreclosing on an 80-year-old
Orange Park, FL woman whom your bank claimed did not live in
the home when, in fact, she did and she happened to have the
foreclosure papers served on her in the home that the bank said
she did not live in. Another example: a married couple in their
50s trying to make the best of everything, they asked for a
loan modification from OneWest Bank, which they were eligible
for, and instead they were foreclosed on.
Explain to the committee, if you would--and I think you are
an earnest, well-intentioned person, but you are sitting there
as a CEO and this stuff is happening that is very unfair to
little people. Why?
Mr. Mnuchin. First of all, Senator, again, thank you for
taking the opportunity to meet with me. I appreciated that and
the time to speak about these important issues.
Let me first say, to the extent that we made any errors or
we ever foreclosed on anybody, I completely understand the
hardship that that created. As I mentioned, we did go through
an independent foreclosure review. And unfortunately, there
were some issues--very, very low rates relative to everybody
else--but there were some issues. And we paid money to those
people to make them whole. And I earnestly feel terrible for
any mistakes at the bank.
Let me comment also that once a week I chaired an internal
committee that dealt with customer complaints. So for any
complaint that went to our regulators, that went to a Senator,
went to a member of the House--came through those--we had a
special group of people that reviewed every single one of those
complaints, responded to all of your offices and responded
directly to the borrower.
We also routinely had the OCC come in and monitor and test
us and go through all those complaints. It was a very, very big
concern because, as you can imagine, from both the FDIC and the
OCC, when we took over IndyMac, the amount of complaints spiked
dramatically.
As I shared with you, the reverse mortgage business was not
something we wanted to buy, but we agreed to buy that as part
of an overall solution. What we were really trying to do is
create a regional bank, and that business really had no part of
it.
There were about $1.5 billion of reverse mortgages that the
bank owned. There were over $20 billion of reverse mortgages
that we did not own, that we serviced for third parties. And
the majority of all those third parties were HUD-guaranteed
mortgages.
And as I have pointed out, I think there are some very
significant issues with the HUD program. One, as I have
mentioned, is a problem with taxes and insurance, that if there
is a shortage on taxes and insurance because somebody outlives
their expectancy, that HUD forced us to foreclose.
There is another problem called a non-borrower spouse,
where if the spouse was not on the mortgage at the time, that
you would have to foreclose on the spouse. We discussed these
issues with HUD.
If I am confirmed, I would look forward to discussing these
with Dr. Carson and hope that HUD would seriously consider
looking at these things. Although it is not under my
responsibilities, I would share my concerns.
These are government-guaranteed programs where we are
foreclosing on senior citizens. And I can assure you, nothing
was more painful to me in the whole process. And I will tell
you, I cannot talk about specific loans because of privacy, but
there are certain things that were in the press.
And the most troubling loan we had was actually to the
``Octomom,'' and we worked very, very hard. That was a terrible
situation. And we worked very, very hard to move her to another
home that they could afford.
But I can assure you that, as chairman of the bank, I took
these issues very seriously. It is not to say that we did not
have certain mistakes. There were mistakes; we regret those
mistakes. As I mentioned, we had hundreds of thousands of
delinquent loans.
And just as an aside, when you talk about loan
modifications, banks are highly incented to do loan
modifications. Anybody who thinks that we made more money
foreclosing on a loan than modifying a loan has no
understanding of this. We were highly incented. Foreclosing on
people is a very, very terrible thing to do, but it is also
very costly to the bank. So we believe in loan modifications,
and we were financially incented to offer them when we could.
So thank you, Senator.
The Chairman. Thank you. Senator Menendez?
Senator Nelson. Mr. Chairman, I look forward to a second
round.
The Chairman. Senator Menendez?
Senator Menendez. Thank you, Mr. Chairman.
And, Mr. Mnuchin, congratulations on your nomination.
I have a different line of questioning. But I have to be
honest with you, the information that came to us this morning
makes me concerned. You have addressed some of it, but not all
of it.
On December 19th of last year, you signed a notarized
affidavit on your questionnaire to the Finance Committee
certifying that it was true, accurate, and complete.
Question 11 of this questionnaire asks nominees to, quote,
``list all''--all--``positions held as an officer, director,
trustee, partner, proprietor, agent, representative, or
consultant of any corporation, company, firm, partnership,
other business enterprise, or educational or other
institution.'' That seems to be pretty pervasive. So it is
almost like an open-book test. And yet, you did not answer in
that questionnaire listing your position as director of a
Cayman Islands corporation, as manager, chairman, and director
of eight additional shell corporations and holding companies,
and nearly $100 million in real estate. And that questionnaire
was corrected only after the committee staff, having done their
due diligence, brought the missing information to your
attention.
Now after that, you admitted to being the director of the
offshore entity Dune Capital International Limited, a Cayman
Island corporation. You admitted to moving your hedge fund Dune
Capital Partners, LLC offshore to Anguilla in 2005, even though
all the business was conducted in New York City.
So, you know, I have a ton of other questions on policy,
but first and foremost is truth and veracity, what Americans
need in their Treasury Secretary--to know that they are going
to be asked to do difficult things or challenging things and
that they understand that there is a system.
In essence, is it not true that what you did here is take
these companies and put them offshore so you could help your
clients, whom you were making money from, avoid U.S. taxation?
Mr. Mnuchin. No, that is not true at all. That is not true,
Senator.
Senator Menendez. Then why would you--you just described
that the purposes of creating these offshore entities were to
help pensions and other entities. And the only reason to go
offshore, as Senator Grassley said when he was, I think, the
chairman of the committee, is that the difference between
investing in the United States or the Cayman Islands is the
possibility of avoiding U.S. taxes.
Your clients--you have made it very clear that you have
paid your taxes. Okay, I will accept your word on that. But the
people or the entities that you were helping and that you were
making money from, you were helping them avoid U.S. taxes.
Otherwise, they could have invested here.
Mr. Mnuchin. Senator, let me first answer the first part of
your question, which I will tell you--and I have said this
before, and I will repeat it again--I assure you that these
forms are very complicated. I do not have the form in front of
me, but I believe it said ``to the best of my knowledge, this
is true.'' And when I certified those forms, I thought it was
correct.
Perhaps it was a mistake in giving the committee
information early, and I should have waited until I had
finished with the 278 and the Ethics Office.
It was not just a function of your office. We were in the
process of correcting things. But----
Senator Menendez. But it does not take a rocket scientist
to understand the word ``list all positions''--all positions.
Mr. Mnuchin. Senator, in all due respect, I had a lot of
complicated entities. You are referring to the fact that I did
not list myself as the director; I listed the entity. So the
fact that I did not list that I was a director was not intended
to hide anything.
And as I have mentioned, in regards to my $100 million of
real estate, my lawyer, who is quite sophisticated in this
stuff and actually has done this for many, many nominees
before, believed that we filled out the form correctly and
that----
Senator Menendez. Well, let us get to the heart of my
question. The heart of my question is, did you not create these
offshore entities, that most Americans cannot create or take
advantage of, in order to help your clients, whom you were
making money from, avoid U.S. taxes?
Mr. Mnuchin. No, not necessarily. Okay? So first of all, I
want to say that it is important that the committee and the
American public understand----
Senator Menendez. What were you doing it for then?
Mr. Mnuchin [continuing]. That this was done so that
different entities could invest. So sometimes it had nothing to
do with taxes, it had to do with what they could invest in and
what they could not invest in.
And as I have said to you, if you want to put me on for the
entire hedge fund and pension fund, we should have an IRS
session to go through these issues, and I would be more than
happy to work with you and your offices to go through it. These
are very complicated issues.
Senator Menendez. Well, I appreciate that, but let me----
Mr. Mnuchin. We need tax simplification.
Senator Menendez [continuing]. Make the complication
simple. One does not go and create offshore entities, at the
end of the day, other than to avoid, in some form or fashion,
the tax laws of the United States. That is pretty simple. And
so that may even be legal, in which case we should definitely
close that loophole, but you have to question whether or not
that is the essence of what we want as leadership.
And so I would like to hear you be more determinative of
saying, yes, we are going to close all of those down if I can
convince the President-elect and Congress to do so, because
what you did may have been legal, but it certainly was to help
people and entities avoid U.S. taxes.
Mr. Mnuchin. Well, first of all, I am absolutely committed
to work with you and your office, as I have said, on tax
simplification and to cut down and make sure that we do not let
anybody avoid taxes.
In certain cases, this was not a function of avoiding
taxes, it was to create eligible investments for certain
nonprofits.
But I agree with you completely. I am onboard with what you
have said. I would be happy to work with your office to
simplify the tax code and cut down----
Senator Menendez. Whose investments were ultimately
eligible, therefore, to avoid some taxes?
Mr. Mnuchin. Again, it may have been an eligibility issue
and not a tax issue. But I agree with you that this does not
make sense. And I will work with you and your office--I have
committed to do that--to make sure that we know why people need
to move entities from Anguilla to everywhere else. And again,
we are not creating jobs there; this is just where these
entities are housed.
I agree with you. And you know, it will create a lot less
work for the tax accountants and the lawyers and make the
American public more money and move our IRS resources
elsewhere. So I agree with you completely, Senator. Thank you.
The Chairman. Your time is up, Senator.
Let me just say, it is ironic and, I think, a bit
hypocritical of my friends on the other side of the aisle to
suddenly have found religion on offshore account holdings.
Evidently, memories are short. At least two of President
Obama's nominees, who now serve in his Cabinet, had Cayman
Islands holdings. Now, that includes the current Treasury
Secretary, who also ran a business unit at CitiGroup, a bailed
out megabank from which he received close to a million dollars
in bonuses. That unit has been sanctioned by the SEC for
selling toxic assets that, quote, ``harmed investors.''
Now, with regard to the nominee's disclosures to the
committee, I want to say this. As part of the committee's
bipartisan vetting process, Mr. Mnuchin in good faith submitted
answers to committee questionnaires and other materials that
were later modified. Mr. Mnuchin's file is now complete. And to
meet demands of some of my Democratic colleagues, the
disclosures now include financial information that is usually
kept confidential, such as the value of personal residences.
The committee appreciates Mr. Mnuchin's efforts to work
through the multiple and complicated requests for information
on what is, by any reasonable measure, an exhaustive vetting
process. But I think it is--let us be fair here.
Senator Wyden. Mr. Chairman, just so we are clear: the
bipartisan staff called out these offshore investments of both
Democrats and Republicans, to Secretary Lew and others. So I
want that understood. And that is the reason that people even
knew that Mr. Mnuchin had not filled out these forms properly.
We did it because the American people deserve to know about Mr.
Mnuchin's offshore investments, even though they had not been
originally disclosed and disclosed fully.
But our track record has been bipartisan, and we have
called out both Democrats and Republicans, as I mentioned.
The Chairman. I think so, and that is the purpose of it.
But let us be fair about it too.
Senator Enzi?
Senator Enzi. Thank you, Mr. Chairman.
And thank you, Mr. Mnuchin, for being willing to serve and
to go through this process. I want to thank you for meeting
with me in my office and going through many of the accounting
functions and initiatives that you will be managing. I do not
ask those types of questions in these kinds of meetings,
because I have noticed that it puts the audience to sleep. But
they are very important, and I was really impressed with your
answers.
I am impressed with your private-sector experience. I have
always said that every business looks really simple unless you
are the one who has to make the decisions on it and you see how
far ahead you have to make the decisions on how you find
employees and how you train employees and how you meet all of
the Federal regulations.
Well, you have actually worked with those rules. You have
actually been forced to learn some things that are going to be
essential to your job. And it is a pretty unique situation.
This is the biggest business in the world, and we do not
even make decisions in a timely manner. We are still working on
the last October 1st spending bills. There are a lot of things
around here that have to change, and some of them you are going
to be in a position to do.
And I have been really impressed with the knowledge that
you have already shown this committee on different things that
most of us have never had any experience with. Very impressive.
Now, I will cover a couple of specific things here, because
I think the Internal Revenue Service has often strayed from its
core function of responsible and efficient revenue collection.
I hope the new Trump administration will make sure that the
Internal Revenue Service stays on track with this purpose,
while also improving the recent record on how it communicates
with taxpayers and practitioners. People have not been able to
get answers.
But something that has been more disturbing to me, to
illustrate, is that in recent years the IRS has inserted flyers
with the tax refund checks, and those flyers--one of them was
produced by the Consumer Financial Protection Bureau, which is
outside of our oversight, and solicited answers from the
taxpayers about their money.
It is not appropriate for the CFPB, an independent
organization, or any other organization to solicit information
from taxpayers, nor is it appropriate for the IRS to help
facilitate this.
As the Treasury Secretary, would you stop this type of
activity? Do you believe that is in the role of the IRS?
Mr. Mnuchin. Senator, thank you. And again, thank you for
taking the time to meet with me, and thank you for your
longstanding service to our country.
And yes, I absolutely would work with you on that. I do not
think it makes sense that the IRS is doing that. I would want
to understand what the reason is, but it seems to make no sense
to me.
And you know, as I have said to you, I think one of the big
issues around the IRS is technology. And I would use my
expertise in technology to make sure that we bring the IRS up
to date. And that is a function of, I understand, old email
systems, old privacy systems. We absolutely need to make sure--
--
And in this world of cybersecurity being such a big issue,
we need to protect American taxpayers' information. And there
should be simple ways that the IRS can interact with the
American taxpayers. If you can get good service in the retail
online business, there is no reason why we cannot use that same
type of technology for taxpayers to communicate and get their
information securely with the IRS.
So I look forward to working with you and your office on
that.
Senator Enzi. Thank you.
The Chairman. Senator, if I could just interject.
You mean you are going to help us modernize the IRS?
Mr. Mnuchin. It would be one of my great priorities,
absolutely, Mr. Chairman.
The Chairman. My gosh. Well, that would be a wonderful
thing.
Mr. Mnuchin. I hope that, at least, is a bipartisan issue
that we can all agree on.
Senator Enzi. Since the chairman used part of my time, I
would like to ask this question here. In 2012, I introduced the
United States Job Creation and International Tax Reform Act
that would help fix our tax code and promote U.S. economic and
job growth. And that bill would help to right the ship by
pulling our international tax rules into the 21st century and
making them more certain so that U.S. companies are not at a
competitive disadvantage with foreign companies.
It would give American companies incentives to create jobs
in the United States and undertake activities here at home so
that they can win globally. It would encourage U.S. companies
to develop products and keep rights to their ideas and
inventions in the United States rather than ship them offshore.
Do you agree that our current international tax system is
outdated and places U.S. companies at a competitive
disadvantage with their foreign counterparts, and would you
work with me on international tax reform?
Mr. Mnuchin. I could not agree with you more. I think the
fact that we have companies like Apple that have hundreds of
billions of dollars offshore because of the differential in tax
rates and that they are being penalized to bring back money----
One of the things I think we all agree on--and I have
talked to the President-elect, and he believes we can bring
trillions of dollars back onshore so that that money is
invested in American businesses and creates jobs.
And I absolutely look forward to working with you and your
office on tax reform, bringing down business rates for big
businesses and small businesses and making American business
the most competitive in the world so that we are not shipping
jobs overseas and money overseas.
Senator Enzi. Thank you. And I have some questions about
the debt and how we are going to handle that. And, as Budget
chairman, I am interested in that. But again, it gets into
those number minutiae, so I will submit those.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Carper?
Senator Carper. Thanks.
Welcome, Mr. Mnuchin.
Mr. Mnuchin. Thank you.
Senator Carper. I am a Senator from Delaware, a recovering
Governor from Delaware. In a lot of my time as Governor, and
even now, I have thought a lot about, how do we create a
nurturing environment for job creation and job preservation? I
want to talk about that in just a moment.
But before I do, some of my colleagues have raised, I think
appropriately, tax havens. The Cayman Islands has been
mentioned, Anguilla has been mentioned.
You have mentioned the IRS. And I just want to say, in the
past years, several times in the past couple of years, John
Koskinen has sat right where you sit, the Commissioner of the
IRS. It is a position that he has been selected to serve; it is
a 5-year term. I think he has maybe another year to go on it.
He is in his 70s. He took this job not because it was
something he aspired to do, but because he was asked to do this
for his country. He is one of the finest public servants I
know. He is often berated. There was an attempt to impeach him
in the House of Representatives, which I thought was lunacy.
And he has said to us many times, as has the Government
Accountability Office--and you have said it here today--we give
the IRS less money than they need, they do not have the people
they need, they do not have the technology they need. For every
dollar we invest in the IRS, we get at least $4 back. I have
seen some estimates as high as $10.
This is not so much a message for you. I think you get it.
But the message is really for us. If we are interested in
raising some revenues and not having to raise taxes, that is a
good place to start. And I was encouraged by what you had to
say.
Mr. Mnuchin. Thank you.
Senator Carper. CFPB, just really quickly, 30 seconds. Your
take on the CFPB. How are they doing? Worth keeping?
Mr. Mnuchin. Well, first of all----
Senator Carper. Just really quickly.
Mr. Mnuchin. Okay. It is a complicated issue. But yes,
okay. The biggest issue I have with the CFPB is that I do not
believe they should be funded out of profits from the Federal
Reserve. I think they should be funded out of an appropriation
process.
Senator Carper. Okay, that is good. Thanks very much.
When I think of that nurturing environment I mentioned
earlier for job creation and job preservation, there are a lot
of components to it. Among them are actually funding research,
actually making sure that we are doing a good job protecting
intellectual property, a sensible tax code, common-sense
regulation, affordable health care, finding ways to get better
results maybe for a little bit less money.
We have had people who have suggested to us that one of the
components that can actually grow GDP is substantial
investments in infrastructure. I have suggested for a number of
years that we use an approach we have taken for years, and that
is the people, the businesses that use our transportation
system would actually pay for them. We have done that for a
half-century. I think that makes sense.
There are other ideas as well, vehicle miles traveled,
where sort of--you figure out how many miles a vehicle is
traveling and assess a fee. There are different approaches to
that. But there is some interest in the incoming administration
in infrastructure investment. And there is another time to talk
about that.
One of the ways to grow GDP or grow jobs is to export, do a
better job of exporting our products and get into other
markets. The Trans-Pacific Trade Partnership, TPP, proposed to
take down a lot of barriers overseas and enable us to have
better access to those markets. And also at the same time, a
renegotiated NAFTA, as you may know, that seemed to me like a
pretty good deal. And I understand that there is an interest in
the administration renegotiating NAFTA. We did that in TPP, but
your thoughts on trade policy, especially the Trans-Pacific
Trade Partnership?
Mr. Mnuchin. Well, first of all, thank you. You have raised
a bunch of very, very important issues.
Senator Carper. I am just going to ask you to go into that
one issue, if you would, please. And it is not a trick
question.
Mr. Mnuchin. I wrote down five of them I wanted to comment
on.
Senator Carper. Yes, we just do not have time. Just on
trade agreements.
Mr. Mnuchin. So on the trade agreements, I think, as you
know, the President-elect is very much interested in free and
fair trade. And as you have commented on, this is not about
limiting imports, this is about growing exports----
Senator Carper. There you go.
Mr. Mnuchin [continuing]. As much as we can.
You have also commented on intellectual property. I think
one of the biggest problems in certain of our trade agreements
is that our American intellectual property is not being kept
and is being taken in foreign countries.
You have mentioned NAFTA. The President-elect is very much
interested in renegotiating NAFTA so that we can keep more jobs
here. I think, as you know, he has picked up the phone and
called many CEOs. I cannot remember the last time a President
or a President-elect did that and worked for the American
workers.
And I look forward to working with you and your office. You
have raised some very, very important issues.
Senator Carper. Okay, thank you.
Mr. Mnuchin. And infrastructure, again, at the appropriate
time, I am happy to comment on infrastructure----
Senator Carper. Thank you.
Mr. Mnuchin [continuing]. Because that is very important to
the President-elect.
Senator Carper. One last quick one: comprehensive
immigration reform. One of the things we have learned is, not
only can we grow GDP by infrastructure investments, smart
infrastructure investments, and some of the other things that I
mentioned, but also by comprehensive immigration reform.
We were strongly urged by the business community for years
to do it. Any take on that?
Mr. Mnuchin. Again, I think you know immigration,
immigration reform, is very important to the President-elect.
It is not completely in my lane, but I have been with him, so I
understand his views on that.
And I think he looks forward to working with the House and
Senate on a very important issue there.
Senator Carper. Well, if you do not share his views on
comprehensive immigration reform, I would just ask that you
mentor him a bit. Thank you.
The Chairman. Senator Cardin?
Senator Cardin. Mr. Mnuchin, first of all, thank you very
much for being willing to serve your country. I appreciate it
very much.
I want to just follow up quickly on Senator Carper's point
on the IRS. You do have allies on both sides of the aisle who
will help you. There are good, professional people who work
there under very difficult circumstances. There are not enough
people there. So I hope you will be effective with President-
elect Trump, because I understand he is calling for a freeze. I
am not sure how that coincides with your desire to make sure
you have adequate personnel at IRS, but I assume that you will
have an opportunity to talk to the President and hopefully get
the number of people you need, because they cannot do the job
with their current workforce.
Mr. Mnuchin. I can assure you that the President-elect
understands the concept of where we add people and where we
make money.
Senator Cardin. Good.
Mr. Mnuchin. He will get that completely. That is a very
quick conversation with Donald Trump.
Senator Cardin. Great. I want to follow up on Senator
Wyden's point on a couple of issues. First, I have another role
in the Senate. I am the ranking Democrat on the Senate Foreign
Relations Committee, so I want to deal with sanctions for one
moment.
I heard you in regards to enforcing the sanctions,
particularly those that are aimed at dealing with those who
sponsor terrorism. We also have sanctions against countries
that are violating international norms on democratic
principles. Russia is top on that list.
And I am going to ask you questions for the record as to
your views on the current sanctions and strengthening the
sanctions. We have bipartisan legislation to strengthen the
sanctions, particularly with respect to Russia's attack against
America's democratic election institutions.
But I want to make sure I understand. You are committed to
enforcing the sanctions against Russia?
Mr. Mnuchin. A hundred percent so, and I think the
President-elect has made it very clear that he would only
change those sanctions if he got, quote, ``a better deal'' and
we got something in return, whether it was on nuclear arms or
other areas.
But yes, Senator, I have talked about this in----
Senator Cardin. And in response to the question that was
asked about using the IRS, to make sure it is not used for
partisan reasons, you will enforce these sanctions without
regard to a person's party affiliation or office?
Mr. Mnuchin. Of course. I think terrorism--and supporting
terrorism and supporting illegal activities--is the most
important issue, and I hope that is a bipartisan issue. And
where there are sanctions, I assure you, I will use them to the
maximum amount allowable by law.
Senator Cardin. And I appreciate that answer. Senator
Warren and I are going to be sending you a letter, if you are
confirmed, to investigate the allegations that Mr. Scaramucci,
who was recently named as the White House Director of
Engagement and Intergovernmental Affairs and a senior adviser
to the President, may very well have violated the sanctions
against Russia in his dealings. And I expect that you would
investigate this issue to see whether there was a violation of
the sanctions law.
Mr. Mnuchin. Of course, anything that you send to me, I
will either investigate myself or make sure that my staff
properly investigates. I would do that a hundred percent.
Senator Cardin. I thank you for that. I want to follow up
on a second point of Senator Wyden's, which really has me
concerned. And that is, you pointed out that you would treat,
in your international role, an American company that is dealing
in the foreign markets equally, even if it is a Trump
enterprise entity.
You are taking an oath to defend the Constitution of the
United States. In the Constitution of the United States, there
is the Emoluments Clause. And you have to make sure that if you
are dealing with a Trump entity, that it is not getting a favor
in exchange for trying to influence the President of the United
States or the Trump administration.
So how do you go about knowing that there are no special
breaks being given to a Trump enterprise if you do not have
full access to that type of information?
Mr. Mnuchin. Well, Senator, let me first say, and I think
we all acknowledge this, whichever side we are on, that we are
in a unique situation where we have a President who has the
vast amount of money that he does and all these issues.
Senator Cardin. We know that. But of course, he is not
doing what every other President has done, every other
President, which is to set up a blind trust and divest. What
you are doing, if you are confirmed, is divesting. That is what
is required. He is not doing that.
So my question to you is, how do you, if confirmed, deal
with compliance with the Constitution to make sure that a Trump
enterprise is not getting special treatment which would violate
our Constitution?
Mr. Mnuchin. Well, Senator, let me first say--and I think
this is a very important issue for the American public, so I
can understand why you are asking it--but let me first say I
know that the President-elect is absolutely following the law
and is committed to following the law and has set out a series
of, although it is not a blind trust, he has removed himself
from his business. He has put his sons in charge of his
business. He is committed that there will be no communication.
Senator Cardin. But is he still----
Mr. Mnuchin. Excuse me, one second. He has put--he is going
to hire an ethics officer. And I can assure you that in my job
of Treasury Secretary, whatever responsibilities I have to
monitor these issues, which are very important, I can assure
you that I will do.
Senator Cardin. But what you did not answer is--and we will
follow up with some additional questions for the record--how do
you determine, to make sure, there is not a break given to a
Trump enterprise, which would violate our Constitution? I
understand he has to comply with the law, but the Constitution
is the supreme law of the land.
Mr. Mnuchin. Well, as you know, I have employed lots of
lawyers, but I am not a lawyer. But the good news is, we have a
big group of lawyers in the Treasury Department and a big
ethics group, and I can assure you that we will make sure that
we absolutely follow the law and the Constitution.
And I have every reason to believe that the President-elect
absolutely wants to adhere to it and will do so.
Senator Cardin. Thank you.
The Chairman. Senator Brown?
Senator Brown. Thank you, Mr. Chairman.
And, Mr. Mnuchin, thank you. And thank you for the
conversation in my office about taxes----
Mr. Mnuchin. Thank you for meeting with me. I appreciate
it.
Senator Brown [continuing]. In China and banking issues.
And I will start with this. Let us clear up one thing. Banks
are not, in your words, ``highly incented'' to do modifications
for their borrowers. That is why we had a systemic breakdown.
It is why so many families lost their homes, and banks were
forced to pay billions of dollars in fines and remediation.
So put that aside; I do not want to talk about your
situation. I understand your defensiveness, both in individual
meetings, mine and others', and in this committee, about what
happened at OneWest. But let me lay this out.
In 2006, businessman Donald Trump responded to a question
about the possibility of a real estate crash by saying, quote,
``I sort of hope that happens, because then people like me
would go in and buy.''
Now, you did not just buy properties, you bought the bank;
you bought the ability to help families stay in their homes.
That is not what you did, so my questions are these. You have
been saying that OneWest--let us assess, look at the record, I
really want ``yes'' or ``no'' answers because I have a lot of
questions. And what I will say is factual in my view; I would
like you to confirm with ``yes'' or ``no.''
Is it true that community groups say that OneWest,
specifically the California Reinvestment Coalition, foreclosed
on 60,000 families nationwide and denied three-fourths of
mortgage modification applications?
Mr. Mnuchin. I am not aware of that. I know they have
objected to----
Senator Brown. Well, they did. They did. Okay, is it true
that----
Mr. Mnuchin. Well, if you know they did, then why are you
asking me that?
Senator Brown. Well, because I want to hear it from you. If
you do not know it, that tells me something too.
Mr. Mnuchin. Well, I do not have it in front of me.
Senator Brown. I am going to keep interrupting because we
do not have a lot of time. I apologize if you see that as rude,
but this is the people's business.
Mr. Mnuchin. I do not see it as rude. That is okay; thank
you.
Senator Brown. Is it true that OneWest regulators, that is
the OCC, said that you had deficient mortgage practices,
foreclosed on 10,000-plus borrowers without proper procedure
and on at least 23 who were current on their mortgages?
Mr. Mnuchin. So what I would say is, we followed the same
procedures----
Senator Brown. ``Yes'' or ``no,'' did the OCC say that?
Mr. Mnuchin [continuing]. That the FDIC followed. We
inherited the FDIC procedures.
Senator Brown. Yes, the OCC has said that.
The Chairman. Let him answer the question.
Senator Brown. Is it true that OneWest's independent audit
firm said that it violated the Service Members' Civil Relief
Act by initiating foreclosures on 54 active duty military
families? That is what the independent audit firm said. ``Yes''
or ``no''?
Mr. Mnuchin. Well, you have the document in front of you; I
do not. Okay?
Senator Brown. Okay, well, they did.
Mr. Mnuchin. And let me just say----
Senator Brown. I am pretty surprised, Mr. Mnuchin--I am
sorry, but I am pretty surprised you do not know these things,
because you have been rather defensive, for probably good
reason, about what happened at OneWest. Is it true that the
California Attorney General----
Mr. Mnuchin. I do want to just comment for the record. We
unfortunately did foreclose on certain people in the military.
It was quite unfortunate. It was inappropriate. We responded to
those people and made them whole.
As I have said, every single person had the opportunity to
have their mortgage reviewed, and we corrected any errors. Our
errors were less than anybody else's. So it is not that I am
being defensive.
Senator Brown. Well, yes, perhaps. Okay, I am going to cut
you off again. I apologize.
Mr. Mnuchin. I am proud of our results.
Senator Brown. Well, I would not be proud of all these
findings. But is it true that the California Attorney General's
Office said that OneWest backdated 96 percent of the documents
they examined and then you aggressively obstructed their
investigation? That is what the Attorney General's office said.
Did they say that?
Mr. Mnuchin. So first, let me comment that I saw the leaked
memo, as you did. I think it is highly inappropriate that
somebody at the Attorney General's office would leak internal--
--
Senator Brown. So is there no truth in that about
backdating 96 percent of those?
Mr. Mnuchin. Again, what I would say is, the primary
regulator was the OCC. They were the ones who had the
obligation to regulate us.
Senator Brown. And OCC said those things that you could
not--Mr. Mnuchin, I am sorry. OCC said you had these deficient
mortgage practices, but you could not remember when I asked you
about OCC.
Mr. Mnuchin. No, that is----
Senator Brown. Now you are citing OCC in response to
California's Attorney General. Is it true that one of the
employees who was in charge of the modifications, one of
OneWest's employees, has accused OneWest of not having any
process in place to help its 3,000 FHA and VA mortgage
borrowers avoid foreclosure and that this same employee, who
was in charge of modifications, has accused OneWest of not
having a process in place to help those VA mortgage borrowers
avoid foreclosures and submitting false claims?
Mr. Mnuchin. It seems to me, in all due respect, you just
want to shoot questions at me and not let me explain what are
complicated issues.
Senator Brown. Well, I will let you explain after I go
through the questions, because I know one answer will take my
whole time. So I will let you explain when I am done with this.
Mr. Mnuchin. Well, then----
Senator Brown. Mr. Mnuchin--I am sorry, Mr. Chairman.
Mr. Mnuchin [continuing]. Let people at least understand
that these are complicated questions.
Senator Brown. They are complicated.
Mr. Mnuchin. Let me at least explain them, otherwise there
is no point in shooting them all at me when I do not have the
ability to respond.
Senator Brown. Okay, you do not, but all of these are
factual things, if you want to follow up with a response later
in more detail.
One example of--and you can answer this and take as long as
you need--one example of an insider loan was the Relativity
Media deal. The FBI denied a FOIA request related to Relativity
Media where you were co-chair, citing enforcement procedures.
Have you been questioned by law enforcement on this, ``yes'' or
``no''?
Mr. Mnuchin. I have not. And I saw that you wrote that
letter yesterday. I assume that the FBI did a thorough review
of my background report. I have no idea why they did not
approve the FOIA issue. I have been told that we have no reason
to believe it is any issue associated with me.
Senator Brown. Fair enough.
Mr. Mnuchin. But you should direct that to the FBI.
Senator Brown. Okay, and I will.
Mr. Mnuchin. And when I had the opportunity to meet with
you----
Senator Brown. And I accept your answer that you are not
being investigated. But I find it interesting that you know
about the letter I sent yesterday. The letter I sent with all
those questions detailing all of the issues that I just asked
about with Bank West, West Bank, Bank West----
Mr. Mnuchin. OneWest, Senator, OneWest.
Senator Brown. OneWest, I am sorry; OneWest, OneWest, I
apologize.
Mr. Mnuchin. That is all right; my father forgot the name
sometimes as well. [Laughter.]
Senator Brown. Okay, good. But the letter I sent you back
in early mid-December about this, you have not even taken the
time to answer, and it really laid out all those issues.
I think the issue is, the OneWest purchase went well for
the Treasury Secretary designee, but it was a disaster for
homeowners, for employees, for investors in Relativity, and for
taxpayers. We can talk more about taxpayer cost on this whole
process and the amount of money that he bought it for, sold it
for, but it was mostly subsidized by taxpayers.
The Chairman. Okay, Senator, your time is up. Now, you take
as much time as you want to answer the questions.
Mr. Mnuchin. Mr. Chairman, thank you. Thank you very much.
First of all, Senator, I did enjoy meeting you.
Senator Brown. Thanks.
Mr. Mnuchin. I do not believe we had the opportunity to
meet before that time. And if I am confirmed, I look forward to
spending more time with you.
Senator Brown. Thank you for saying that.
Mr. Mnuchin. I know that you have some--although we may not
agree on everything, there were certain things we did agree on
when we met. And I have a lot of respect for you as a Senator
to hear your issues.
Now, I did tell you, I did acknowledge that you sent me the
letter. I was advised by the staff that the appropriate thing
was for me to come here and answer questions or meet with all
of you independently and answer questions that you have. And if
I do not satisfy that, you have the ability to submit questions
afterwards, which I will respond to.
When I came to your office, I told you that, and I said
that I would spend as much time with you as you wanted
answering those questions, that they were quite significant,
you know, because I knew they were complicated. So I did tell
you, although I would not respond to them in writing at that
point, that I did understand your questions and I wanted to
address them.
The Chairman. Senator Thune?
Senator Thune. Thank you, Mr. Chairman.
Mr. Mnuchin, welcome.
In the last 8 years, we have not had a single year where
the growth rate has exceeded 3 percent. And a lot of the
administration, the current administration, describes that as
the new normal. Tell me, what do you think is a reasonable
expectation in terms of the growth rate in our economy?
Historically, if you go back to World War II, we have
averaged about 3.2 percent a year. What do you think is a
reasonable growth rate?
Mr. Mnuchin. Hang on; I am just looking at some of my
notes. I mean, the short answer is, I have said publicly and I
believe that we should be able to get to 3 percent sustained
GDP. I think that that is absolutely important.
I think that as a country, the most important issue we have
is economic growth, that whatever issues we have as Republicans
or Democrats, I think we can agree that, with more growth, it
is a lot easier to solve these issues. And we should all be
focused on things that help grow the economy.
In 1984, we had 7 percent. In 1998, we had 5 percent. And
in 2005, we had 3 percent. That was the last time we had
appropriate growth rates. So I share the President-elect's
concern of low growth.
Our number-one priority, from my standpoint, is economic
growth. And I can assure you, I will work tirelessly, if I am
confirmed, to create growth in the economy and create pro-
growth programs. And I commit to work with all of you on that.
I believe that tax reform will be our first and most important
part of that.
Senator Thune. Yes. And the President-elect has identified
tax reform, reg reform--lessening the regulatory burden too.
Those are two areas that I think we can pursue to unleash the
economy and achieve a higher level of growth.
To what degree do you think that regulations, and
particularly the heavy volume of regulations coming out of this
administration, have had an impact on small business? Even
yesterday, the Obama administration proposed a 277-page
regulation on partnership audit rules that affects pass-through
businesses, farmers, small businesses, the folks I represent.
And in September, we sent a letter to Secretary Lew trying
to get him to withdraw some regulations that dealt with
valuation discounts that impact estates and make it very
difficult for a small business or a farmer or rancher to pass
that business on to the next generation.
When you get over there, are you going to, hopefully, look
at withdrawing those types of regulations as quickly as
possible and undo a lot of the economic harm? I think, frankly,
this is part of what has adversely impacted the growth rate in
this economy.
Mr. Mnuchin. Absolutely. And I will tell you, both I and
the President-elect believe in appropriate regulation. But in
many, many areas of the economy, not just in financial
services, there is excess regulation that is inhibiting jobs
and growth and hurting the American workers. And we are
committed.
And specifically on what you have mentioned, on the IRS
regs on family businesses, I am committed to work with you and
your office.
You know, we want to make sure that we cover the
appropriate loopholes so that if people have businesses set up
to avoid taxes, and they are not a real operating business, it
is one thing, but for any operating business, we need to make
sure that for people who own minority interests in operating
businesses, the valuation for tax purposes is reflected
appropriately.
And anybody who follows the markets knows that there is a
significant difference between control and non-control. And you
know, the IRS should follow fair valuations. So we should make
sure we collect the most money and not have lots of loopholes,
but on the other hand, we need to reflect fair valuations.
Senator Thune. Okay. Senator Cardin and I chaired, in the
last Congress, a working group on business tax income. And one
of the issues that came out of that working group is, if we get
into comprehensive tax reform, and I hope that we do, how do
you treat pass-through businesses? To me, that is one of the
most important questions.
Ninety percent of the businesses in this country are
organized as pass-throughs. Fifty percent of net business
income is generated by pass-throughs, and they employ about 55
percent of the people in this country.
And so, as we think about tax reform, I guess I am asking
you if you would commit to work with us to ensure that pass-
through businesses are treated fairly and that whatever we come
up with in terms of policy reflects the economic impact that
LLCs and partnerships and subchapter S corporations that are
organized as pass-throughs have on our economy.
Mr. Mnuchin. Absolutely. And not only am I committed to it,
but I have actually spent a lot of time on this issue already.
I have worked with the trade group that follows small
businesses, and not only did they support the Trump economic
plan, which I helped design, but they were kind enough to write
a letter of support for me to the committee.
And I think the important issue on pass-throughs that we
are committed to is that we want to make sure that there is a
business tax--this is not just a corporate tax--that there is a
business tax.
If there are large pass-throughs that earn tens of millions
or hundreds of millions of dollars, we want to make sure that
they keep the money in the company as an incentive and that
they do not use pass-throughs as a way to get lower taxes than
they would pay in personal income tax.
And we want to make sure that hedge fund managers do not
use pass-throughs, again, to avoid what would be higher
personal income taxes.
But we are absolutely committed, and we have spoken to many
small businesses and entrepreneurs to make sure that they are
protected and they get the benefit of the business tax.
So I appreciate your concern. We have heard this loud and
clear on the campaign trail. And I can assure you, it is
something we are committed to work with you and your office on.
Senator Thune. Good, thank you. Keep that focus on growth.
That is what we want, to get that growth back up.
Mr. Mnuchin. Thank you.
Senator Thune. Thank you.
The Chairman. Senator Toomey is next.
Senator Toomey. Thank you, Mr. Chairman.
And, Mr. Mnuchin, thank you for joining us. I enjoyed our
chat the other day, and I appreciate your willingness to serve
in this extremely important post.
Mr. Chairman, I want to thank you for observing some not-
too-distant history: the fact that our current Treasury
Secretary had investments in the Cayman Islands. And maybe my
memory fails me, but I do not remember the outrage from my
colleagues on the other side when it came to his circumstances.
So there seems to be a bit of a selectivity on the part of
that.
I want to just briefly go back to a point you made earlier,
Mr. Mnuchin, because I think it is very important, especially
for the benefit of those among us who have no experience in
banking at all. But you made a point that I think is really,
really important. I have never heard of a bank that would not
prefer loan modification every time over foreclosure, not only
to avoid the misery that results for their customer, but also
because foreclosure almost guarantees locking in substantial
losses for the bank.
Would it be fair to say that virtually any time that it is
possible, your bank would have preferred a loan modification
for the borrower?
Mr. Mnuchin. Absolutely. And as I said, we ran a net
present value test that was established by the U.S. Treasury
assumptions. And we put in the assumptions. Any time we could
collect more money by doing a modification, we were allowed to
do a modification. And by definition, we were incented to do a
modification.
Senator Toomey. Right.
Mr. Mnuchin. And by the way, I think we would have done
those modifications even if we had not received the HAMP
incentives from the U.S. Government, which on our FDIC loans we
rebated to the FDIC. So banks are incented to do this, whether
they get the subsidies from the Treasury or not.
Senator Toomey. Thank you.
There are a couple of things I want to touch on quickly, if
we could. On the trade front, the President-elect has indicated
an interest in revisiting trade agreements. Some of them were
negotiated a long time ago. And I am sure there are things that
could be modernized and updated.
But would you agree that it would be a mistake to evaluate
whether or not a trade agreement is a good one solely by
looking at whether or not we have a trade deficit with the
country in question? Would it be a mistake to make that the
sole criteria?
Mr. Mnuchin. I would agree with that.
Senator Toomey. Okay, good. Also, would you agree that many
of the periods of strong economic growth that we have had in
recent decades have corresponded to periods of a strong dollar
and that often, if our economy is performing well and the world
perceives our economy to have a bright future, the inevitable
result will be a stronger dollar?
Mr. Mnuchin. Yes. Let me just comment on that, because I
think that the U.S. currency has been the most attractive
currency to be in for very, very long periods of time. I think
that it is important, and I think you see that more than ever.
The currency is very, very strong. And what you see is people
from all over the world wanting to invest in the U.S. currency.
I think when the President-elect made a comment on the U.S.
currency, it was not meant to be a long-term comment. It was
meant to imply that, perhaps in the short term, the strength in
the currency, as a result of free markets and people wanting to
invest here, may have had some negative impacts on our ability
to trade.
But I agree with you: the long-term strength over long
periods of time is important. And again, that is a reflection
of, I believe, the fact that we have the most attractive
investment environment in the world.
Senator Toomey. Right.
Mr. Mnuchin. And we just have to protect our U.S. companies
so that they are not forced abroad.
Senator Toomey. The last point I want to make, running low
on time here, is that the many failures of Dodd-Frank, in my
view, include title II, which I believe is a codification of a
mechanism to require future bailouts from taxpayers in the
event that a large financial institution should fail again.
Would you share my view that it is much more desirable to
amend the bankruptcy code so that we could handle the
resolution of a large, complex financial institution through
bankruptcy and not ever have to go to taxpayers to bail out big
banks?
Mr. Mnuchin. Well, I 100-percent agree with you that we
should not be in the business of bailing out big banks. And I
100-percent agree with you that I share certain concerns on
title II. I think we need to look at the bankruptcy code and
what we can do as an alternative.
But I would just comment that the bigger issue is, for
long, long periods of time, the FDIC was able to take over and
resolve banks when the regulators determined that there were
issues. And one of the big problems we had during the financial
crisis was the intermingling of banks and holding companies and
complex securities.
So I do not necessarily--I think if we have proper
regulation, a lot of the need for title II also goes away.
Senator Toomey. I see I have run out of time. Thank you,
Mr. Chairman.
The Chairman. Senator Bennet?
Senator Bennet. Thank you, Mr. Chairman. Thanks for holding
this hearing. Thank you, Mr. Mnuchin, for your willingness to
serve and for our meeting yesterday.
Just for clarity, The Wall Street Journal yesterday wrote
``dollar sinks as Trump talks it down.'' Do you believe the
dollar is too strong?
Mr. Mnuchin. Again, I believe in the short term----
Senator Bennet. As Treasury Secretary, are we ever going to
hear you say that the dollar is too strong?
Mr. Mnuchin. As Treasury Secretary, I do not see it as my
role commenting on the dollar on short-term movements. I have
commented on what I believe are the long-term----
Senator Bennet. Let me ask you a different question. In
2011, due to the dysfunction in Congress, we almost failed to
raise the debt ceiling here. And as a result, a rating agency
downgraded our Nation's debt for the first time in history. The
stock market lost 17 percent of its value and did not recover
for almost a year. And consumer confidence fell 22 percent in
just a few months--a completely self-inflicted wound on the
American economy. This unfortunately hurt Americans' retirement
savings and dealt a blow to both growth and job creation.
During the campaign, Mr. Trump suggested he could somehow
refinance or renegotiate our existing debt. While he walked
away from the idea initially, later in the campaign he again
suggested the country could pay our creditors less than what
they were due.
Specifically, he said, quote, ``You go back and say, hey,
guess what, the economy just crashed, I am going to give you
back half.'' He also suggested that the United States never has
to default, quote, ``because you print the money.''
Do you agree with these statements?
Mr. Mnuchin. Senator, first of all, thank you for asking
the question about the debt ceiling, which I do want to comment
on because I----
Senator Bennet. Good, because I have another question on
the debt ceiling.
Mr. Mnuchin [continuing]. Think it is a very important
issue for all of us. And if I am lucky enough to be confirmed,
it will be something that I will----
Senator Bennet. Okay. Please do not filibuster. I
appreciate that.
Mr. Mnuchin. The President-elect has made it perfectly
clear, and I think it is perfectly clear, that honoring the
U.S. debt is the most important thing.
Senator Bennet. Okay, so----
Mr. Mnuchin. And I hope that when we get to the point, if I
am confirmed, where we have to raise the debt ceiling, that we
will not go through another one of these issues, because there
are certain things that I would have the power to postpone, but
I firmly believe the U.S. has the obligation to honor its debt.
Senator Bennet. Okay. Then, can you commit to working with
the Congress to pass a clean debt ceiling?
Mr. Mnuchin. I will commit to absolutely work with the
Congress, the House and the Senate, so that we do not get to
the last minute and run out of money.
Senator Bennet. Is that a ``yes,'' you will commit to
passing a clean debt ceiling?
Mr. Mnuchin. I do not know your technical issue of what a
clean debt ceiling is----
Senator Bennet. The debt ceiling----
Mr. Mnuchin [continuing]. But let me be clear, I would like
us to raise the debt ceiling sooner rather than later----
Senator Bennet. That is clear enough for me. Thank you.
Mr. Mnuchin [continuing]. So that we do not run a risk of
defaulting on our obligations.
Senator Bennet. I am grateful for that answer.
Mr. Mnuchin. Thank you.
Senator Bennet. The nonpartisan Tax Policy Center found
that President-elect Trump's tax plan would increase the debt
by $7.2 trillion over 10 years. The President-elect has also
proposed increasing defense spending and said that he will not
touch entitlements, like Medicare or Social Security. So far he
has only suggested reducing spending on nondefense
discretionary spending.
In 2015, as you know, nondefense discretionary spending
comprised about 16 percent of the budget, about $583 billion.
This includes funding for veterans' benefits, transportation,
our national parks, and our investments in research. So even if
we did not spend a single penny on any of these priorities for
an entire year, which I would not suggest, but even if we did
not, that would only pay for about 8 percent of Mr. Trump's tax
plan.
Is a tax plan that increases the debt by $7.2 trillion an
acceptable outcome to you?
Mr. Mnuchin. I believe the $7.2-trillion number was the
first tax plan and not the second tax plan. I believe it scored
dynamic, closer to $2 trillion.
Senator Bennet. The first tax plan was $11 trillion. The
second, I think, was $7.2 trillion.
Mr. Mnuchin. Well then, you must be referring to static and
not dynamic. The dynamic number was closer to $2 trillion.
Senator Bennet. The dynamic was $3.6 trillion. So in any
case, what we are doing is adding mountains of debt.
Mr. Mnuchin. Let me just comment that I have discussed the
debt with the President-elect. We are both concerned that we
have gone from $10 trillion to $20 trillion of debt. We think
that the way to reduce the debt is by economic growth. And that
will create the opportunity for us to pay down the debt.
Now, let me just make a comment on the tax plan.
Senator Bennet. So just to be clear on that, though,
Senator Thune said, well, in our history the average growth
rate we have seen is about 3.2 percent. It would be great to
get to 4 percent--you said between 3 and 4--but there is no way
that is going to fill the gap that is projected in these tax
plans.
And I can accept the fact that the President-elect may have
changed his mind or you differ with him. I am just trying to
understand whether you would find it acceptable to bury the
American people under this kind of proposed debt.
Mr. Mnuchin. Again, I think, as you know, we had a rather
modest campaign staff relative to the other people out there,
so one of the things I look forward to, if I am confirmed, is
having access to all the people at Treasury who model these
things.
So we were forced--we had some internal models--but we were
forced to rely upon external models. Certain of the assumptions
we agreed with; certain of the assumptions we did not agree
with.
I think what is important is that President-elect Trump has
a pro-growth economic tax plan. And we are sensitive to the
costs of that plan.
Yesterday, I did have the opportunity to meet with Senator
Wyden, and we talked about the process for tax reform. I will
be the person from the administration taking the lead on that,
and I would look forward to working with the House and the
Senate, both Republicans and Democrats, to move forward on tax
legislation.
Senator Bennet. I am out of time, Mr. Chairman. I realize
that. I want to just make one observation, which is that Mr.
Mnuchin, in fairness to him, has twice praised the employees at
the Treasury Department today. And I just want to say that that
is a refreshing and welcome change from what we have heard up
until now in a lot of these hearings.
The Chairman. Senator Isakson?
Senator Isakson. Thank you very much, Mr. Chairman.
Mr. Mnuchin, welcome. I am sorry I have been in and out of
the room, but I have been listening outside while I have been
outside----
Mr. Mnuchin. Thank you.
Senator Isakson [continuing]. So I think I am pretty much
up to date.
And I am really going to talk to you about something I had
not prepared myself to talk about until I heard some of the
other questions and testimony that went on. I want to talk
about mortgage-backed securities--Fannie Mae and Freddie Mac--
in 2008.
Your purchase of IndyMac was in 2008, is that correct?
Mr. Mnuchin. Yes, it was in December of 2008 we committed
to it.
Senator Isakson. And the beginning of the crisis really was
in July of 2008 when Merrill Lynch drove down their portfolio
of subprime securities by 71 cents on the dollar. Is that not
correct?
Mr. Mnuchin. I think that is correct.
Senator Isakson. And it started a domino effect around the
world that collapsed the mortgage-backed securities and their
value. Is that not correct?
Mr. Mnuchin. That is correct.
Senator Isakson. When you purchased IndyMac, it had a
number of those loans in its portfolio, is that correct?
Mr. Mnuchin. It had a portfolio of mortgage-backed
securities.
Senator Isakson. Mortgage-backed securities, within which
were included those loans.
Mr. Mnuchin. Yes, that is correct.
Senator Isakson. Because what Wall Street did is, Wall
Street packaged loans and put them into a security and then
marketed them based on a high yield. Is that not correct?
Mr. Mnuchin. Yes. Well, what actually happened in the case
of IndyMac is, they had securitized the loans themselves. They
created their own securities. The market backed up, they could
not afford to sell them, and they got stuck keeping them.
So in many cases, most of the mortgage-backed securities we
had, they did not buy. Most of them were failed sales.
Senator Isakson. Is it not true that Freddie and Fannie
guaranteed and assured loans, pretty much at the direction of
the Congress of the United States? When it came to the
affordable housing loans, is it not true that Congress directed
them to have a larger percentage of affordable housing loans in
their portfolio?
Mr. Mnuchin. Absolutely, and I believe that is,
unfortunately, what led them to buy a lot of bad loans.
Senator Isakson. What I want everybody to understand when
they are talking about these mortgage issues--I was in the real
estate business for 31 years and was, of course, in Congress at
the time this went on.
But what happened in a lot of these loans is that they were
made because of the inducement or the direction of Congress to
take more of them. What was called an affordable housing loan
ended up being a subprime loan, if you will, which ended up
being a high-risk loan, which ended up having a high interest
rate on it, which with a high coupon was packaged together into
securities and then sold around the world. Is that not correct?
Mr. Mnuchin. It is true. I mean, these loans had all
different types of acronyms. They were low docs, they were
subprime. They just should have been called bad loans. That is
what they were.
Senator Isakson. And your IndyMac, as I remember and I
recall, tried everything it could to recalibrate those loans,
restructure those loans, and renegotiate those loans to keep as
many as possible from going into foreclosure. Is that not
right?
Mr. Mnuchin. That is true. And not only for the loans that
we owned, but loans that we serviced for Fannie Mae and Freddie
Mac. As a matter of fact, the one person who came to my home
and protested at my home, it was a Fannie Mae loan, and I was
not able to do anything about that. And it was through my
multiple calls to Fannie Mae that I was able to get a loan
modification for that person.
But many times people thought we owned the loans, and we
did not. They were owned by Fannie Mae and Freddie Mac and
other security holders.
Senator Isakson. And the main point I want to make for the
sake of this argument--and I am sure a lot of the questions you
are going to get--is, a lot of these loans were originated at
the auspices of or with the encouragement of the United States
Government and the Congress of the United States. And they were
called affordable housing loans.
A lot of people bought those loans that had been made by
somebody else when they bought an institution, so they
inherited the problem; they did not originate the problem.
There is a world of difference between originating a loan
and buying a loan, is that not correct?
Mr. Mnuchin. That is correct. I can assure you that the
loans that we originated on the mortgage side going forward
were good loans and had nothing to do with those terrible
legacy loans. So thank you for pointing that out.
Senator Isakson. That is the important point. Because if
you originate something, you own it. If you acquire something
that is a bad debt or a bad piece of paper, shame on you for
buying it, but it is not your problem for creating it. And that
is the important thing to know, is that not correct?
Mr. Mnuchin. That is true, Senator. Thank you.
Senator Isakson. And when I say ``shame on you,'' I do not
mean shame on you in that you did something wrong. I mean shame
on you in that you inherited something that was wrong by buying
something that was good.
Mr. Mnuchin. Yes, I understood that. Thank you for pointing
that out.
Senator Isakson. One last point. I hope I have made that as
clear as I could. One last point. I have been told by my State
Director of Revenue that the IRS is not sending out or that the
Federal Government is not sending out W-2 forms to the State
revenue departments in the United States. Is that not correct?
When you become Treasury Secretary, I would hope you would
pay attention to that and try to direct them to start going
back to doing that, because the only way we can keep bogus
loans from intruding into our portfolios is for people to get
back their income tied to their Social Security and for the
Federal Government to get their report on that at the same
time.
So if you would work on seeing to it that those practices
are ended somewhere around the country, I would appreciate it
greatly.
Mr. Mnuchin. Thank you. I will be committed to work with
you and your staff on that. That sounds like a very important
issue.
Senator Isakson. Thank you for your willingness to serve,
and congratulations on your nomination.
Mr. Mnuchin. Thank you, Senator.
The Chairman. Senator Heller?
Senator Heller. Thank you, Mr. Chairman.
And, Mr. Mnuchin, to you and your family, welcome to the
hearing today.
Since the beginning of the Great Recession, no State was
hurt harder than the State of Nevada. And you are probably
well-aware of that. We led the country in bankruptcies,
foreclosures, and unemployment, so you can imagine that we are
a little sensitive as to who becomes the next Treasury
Secretary, having gone through that over the last 8 or 9 years.
You came into my office on January 4th and we had a good
discussion, and I appreciate the visit. I asked you some
questions, and I would like to ask you the same questions
today.
One question was, how many Nevada homes were in OneWest
Bank's portfolio?
Mr. Mnuchin. Unfortunately--and I will go back and request
that information from the bank--I no longer have that
information. But I will work with the bank to try to get that
for you.
Senator Heller. How many Nevadans did OneWest Bank
foreclose on while you owned the bank?
Mr. Mnuchin. Again, I have the information that is in
public reports. But I am absolutely committed to go back and
get that information for you from the bank. So I apologize; I
do not have that with me today.
And I do appreciate how hard your State was hit in the
foreclosure crisis.
Senator Heller. Do you know how many Nevadans OneWest Bank
provided assistance to through loan modifications?
Mr. Mnuchin. Again, I will go back and try to get all that
information for you.
Senator Heller. Here is the reason why I asked you these
three questions over again: it is that this is the seventh time
I have asked. So I asked you when you were in my office--and I
had my staff follow up on it--three times by text, and twice by
phone, and we still cannot get the answers to these questions.
And I am not quite sure with 2 weeks--well, your own comments
were that you guys had responded to 5,000 pages, 5,000 pages of
questions asked. Why were these three questions not asked if
you had 5,000 pages of questions that you answered?
Mr. Mnuchin. Well, first of all, let me apologize to you,
because I do recall you asking them in your office. And there
is no excuse that they have not been answered. I was not aware
that my staff also got those questions, so I apologize to you.
And I assure you personally that as soon as I get out of this
hearing, I will request that information from the bank.
You know, we are responding to a lot of other information,
so I apologize. This is important to you, and you have my
commitment that we will get that.
Senator Heller. In 2008 when OneWest purchased IndyMac, can
you tell me what motivated that transaction? Was it a way to
save the bank? Was it a way to make money? Or was it a way to
keep people in their homes, or was there some other reason?
Mr. Mnuchin. I think it was all three of the above. So, I
saw the opportunity--I thought that there was going to be a
banking crisis, and I saw the opportunity where we thought we
could turn around the regional bank and turn it from what was a
lousy mortgage bank into an attractive regional bank and that
there was the opportunity to have an attractive investment as
well.
Obviously, I had to convince my investors that they would
make money, but I saw it as also a great goal of building a
business.
Now, I just want to comment that, yes, my investors made a
lot of money on OneWest, but I would just comment that, if we
had just invested in JPMorgan and Bank of America and a handful
of other stocks, we would have made a lot more money and I
would not have had to work nearly as hard.
So a big part of the financial return ultimately was, we
invested in the market at a very, very depressed period of
time.
Senator Heller. Were you motivated--or let me ask it this
way. Was it an objective of OneWest Bank to foreclose on
Nevadans in order to receive compensation from the FDIC in
their shared loss agreement?
Mr. Mnuchin. No, quite the contrary. So again, when we
bought IndyMac from the FDIC, it was inherent in these
agreements, we committed to do loan modifications. So when we
bought the bank, that was the agreement.
Again, as I have said before, we were proud of loan
modifications started there. And we actually had a bunch of
incentives, whether it was HAMP incentives or other things, in
the loss share agreement where it was actually much better for
us to do loan modifications.
So as I have said before, I can assure you that what
prevented us from doing more loan modifications was either the
net present value test or was what the qualifications were. So
we were required to get updated income, and people had to be
able to effectively requalify for the loan.
So as I have said before, not only from a social basis did
I want to keep people in their homes, but we were economically
motivated to do that.
Senator Heller. How much did the FDIC pay OneWest for the
losses?
Mr. Mnuchin. What do you mean by, how much did they pay us
for the losses?
Senator Heller. What was the compensation from the FDIC for
foreclosing on homes with the shared loss agreement?
Mr. Mnuchin. So what we did, the way the shared loss
agreement worked--and again, I would comment, you know, I think
there have been, like, 400 shared loss agreements. I think,
according to the FDIC's public data, they believe that they
saved $40 billion by using the shared loss agreements.
Senator Heller. The answer is $1.2 billion, $1.2 billion.
Mr. Mnuchin. No, but that is after we absorbed $2 billion
of losses. So I just, I want to----
Senator Heller. So you are not saying that that is not a
motivation to foreclose on a home, $1.2 billion?
Mr. Mnuchin. No, it is not a motivation, because there were
restructuring fees that were put through when we did loan
modifications. And we wanted good loans. We were not--again,
let me just be clear. We wanted good loans. Having good loans
that performed under the loss share agreement was absolutely
critical.
Senator Heller. One more question. Did OneWest Bank
specifically target minority communities in Nevada for
foreclosures?
Mr. Mnuchin. Absolutely not.
Senator Heller. Mr. Chairman, my time has run out.
The Chairman. Senator Casey?
Senator Casey. Mr. Chairman, thank you very much.
Mr. Mnuchin, I appreciate you being here with your family.
And I want to start with a subject that you have already
answered some questions about: the issue of mortgage
foreclosures, but also modifications.
I am holding in my hand, I guess a 4-page, if you look at
both sides, document entitled--and this is Channel 4 in
Pittsburgh, an investigative report just announced this week--
quote, ``Trump pick for Treasury Secretary foreclosed on
hundreds of homeowners in western Pennsylvania.'' And it is
dated January the 16th.
Mr. Chairman, I would ask consent to have this be part of
the record.
The Chairman. Without objection.
[The article appears in the appendix on p. 99.]
Senator Casey. Let me just read you part of it, Mr.
Mnuchin, because I know sometimes when these reports refer to
individuals, you may know them, you may not. I am not going to
ask if you know this person.
But here are just a couple of excerpts, according to
Channel 4 in Pittsburgh: ``Nellie Mlinek lost her husband to
cancer, lost her son to an overdose, and then she lost her home
to OneWest Bank.'' She says, and I am quoting from her words
here, ``One thing I will never get over is my son's death.''
She lives in Westmoreland County, just a little bit east of
Pittsburgh, in Ruffs Dale, that is the name of the community.
Here is what Nellie hoped would have happened. She said,
and I quote, ``They,'' meaning OneWest, ``they should have
worked with me to meet a payment that I could make.'' The
report goes on to say she filed for bankruptcy, but even then
could not save her house. She said it caused her, quote, ``a
lot of depression.'' And then it lists a couple of examples
from other communities that were foreclosed on.
A house in White Oak was foreclosed on in 2014, a house in
North Versailles in 2013, a house in Penn Hills in 2012, a
house in Pittsburgh in 2011. But again, the headline says,
``hundreds of homeowners in western Pennsylvania.'' Depending
on where you draw the line, that is probably 10 counties,
roughly. So one region of a State of 67 counties.
One of the reasons I highlight that is to, number one,
focus on the impact that those foreclosures had on one
community and one State, but also to ask you some questions
just so I can make sure the record is clear to the extent that
we can get to these issues in this line of questioning about
modifications and foreclosures.
One of the statements you made in my office when we met--
and I appreciated the time we had--you said that OneWest,
quote, ``did lots of modifications.'' And then on the question
of foreclosure itself, you said at the time, ``we only did
30,000 to 35,000 foreclosures.'' Is that correct? Is that----
Mr. Mnuchin. That was for the period of time that we were
talking about: 2009, 2010.
Senator Casey. So that is just the 2009 and 2010 number.
Mr. Mnuchin. I believe the 36,000 were 2009, 2010 versus
there were 175,000; the 100,000 loan modifications were over a
slightly longer period of time.
Senator Casey. So let me just get this. Over the whole
period that you were the leader of OneWest, how many
foreclosures total were there nationwide?
Mr. Mnuchin. I do not have that, but I can find the number.
But let me just comment, since there is a lot of talk about
this foreclosure business. Again, 93 percent of the loans that
we serviced, we serviced for third parties. We sold this
business. So again, I never wanted to be in the mortgage
servicing business. I did not want to be in the mortgage
business. I wanted to build a regional bank.
So OneWest is no longer. We sold years ago the servicing
business because we did not want to be in that. We sold that
business to Ocwen.
Obviously, the loan that you are talking about, I mean, it
sounds like an absolutely horrible situation, and I sympathize
for that person.
Senator Casey. Well, I appreciate it. I only have limited
time. Let me get to the second question here on modifications.
There seems to be some discrepancy here about the numbers
on modifications. You say in your testimony today, and I am
quoting you here at the bottom of page 2, ``Ultimately, OneWest
extended over 100,000 loan modifications to delinquent
borrowers.''
Now, ``extended'' is not the same as a modification, you
would agree with me, would you not?
Mr. Mnuchin. No, no, ``extended'' means they were put on
modifications.
Senator Casey. But that is not a completed modification.
Mr. Mnuchin. No, no. Again, they were offered and they were
put on a loan modification.
Senator Casey. But in fact, in fact, according to a
document that I will also make part of the record--this is a
one-page document from HAMP, the Home Affordability and
Modification Program, that, Mr. Chairman, I would ask be made
part of the record: ``Making Home Affordable: Summary
Results.'' That is the name of the document.
The Chairman. Without objection.
[The document appears in the appendix on p. 101.]
Senator Casey. In fact, just permit me to say one more
thing, Mr. Chairman. In terms of total modifications, it was
really only 22,908. So we will put that into the record. And I
will have more questions later. Thank you.
The Chairman. Without objection.
We will now turn to Senator Cassidy.
Senator Cassidy. Mr. Mnuchin, nice to see you.
Mr. Mnuchin. Nice to see you; thank you.
Senator Cassidy. As you can tell by where I am, I am fairly
junior on this panel. I will note, though, you have been
somewhat assaulted by innuendo, and my sympathies for being
assaulted by innuendo.
Secondly, as regards economic growth, I wrote an editorial
with a friend in The Wall Street Journal a few years ago that
showed that if we had had the economic growth from 2001 to 2014
as we had from 1993 to 2000, in 2014 we would have had a $500-
billion surplus despite entitlement spending and despite
whatever, as opposed to the $500-billion deficit we had.
So I appreciate your acknowledgment that pro-growth
policies cover a multitude of sins, so, good for you.
Mr. Mnuchin. Thank you.
Senator Cassidy. That said, I represent a lot of rural
parishes, and there are two things driving economic growth in
such parishes: typically utility companies--they want to sell
more--and community banks. And since Dodd-Frank was passed--you
and I discussed this in my office--the number of community
banks has just, like, oh, my gosh, it has just plummeted.
``OMG,'' as my daughter would say.
So your thoughts as regards, how do we revive the fortune
of community banks which, in my mind, is, how do we revive the
economic prospects of rural America?
Mr. Mnuchin. Well, thank you. And first of all, I enjoyed
the opportunity to meet with you and talk about a bunch of
these issues. And I think--as I have mentioned before, I am
very concerned that we have been and continue to be in the
business of putting community banks and small regional banks
out of business, that the regulatory costs----
Senator Cassidy. Can I interrupt for a second?
Mr. Mnuchin. Of course.
Senator Cassidy. One guy, I do not know what his bank is
worth, $80 million, he told me that he had 64 regulatory visits
in a 52-week period. The marginal cost for this small bank--he
is thinking, why am I not selling? I am sorry, continue.
Mr. Mnuchin. No, that sounds about right. From my
experience, that is about the right ratio.
So I agree with you completely. And as I have said, if we
want to have economic growth--you know, for us to end up with
four or five big banks in this country and to be dealing with
the ``too big to fail'' and everything else, or the too big to
succeed--we need to have banks. We need to have regional banks,
we need to have community banks. Those banks understand the
people in the community and can make good loans.
Senator Cassidy. Now also, related to that and something
you were speaking of, I think, with Senator Thune, it does not
seem like we have an absence of capital in our society right
now. We have a lot of capital.
Mr. Mnuchin. That is correct.
Senator Cassidy. It is just that we cannot get capital down
to Evangeline Parish for somebody who is an entrepreneur to
take that capital and to take his invention and bring
prosperity to Evangeline Parish. And you do not need to know
where Evangeline Parish is. The fact that you do not know shows
that it is a smaller parish in terms of population. So I
presume you agree with that.
Mr. Mnuchin. I do completely.
Senator Cassidy. Now, related to that, and again--this is
something for my edification--I do not know the answer to this.
But it strikes me that there are two possible goals of tax
reform. One is to create more capital. I think under the Reagan
tax cuts, my kind of gestalt of that period is that high
marginal rates deprived capital to those who needed it. But it
seems as if we have enough capital floating around, although
perhaps chokeholded at certain points.
And then the other point of tax reform would be to align
incentives. You spoke earlier, I think with Senator Thune,
about these pass-throughs. You want to incent folks to keep the
money within the business.
Mr. Mnuchin. That is correct: reinvest it and create jobs.
Senator Cassidy. Now, would you agree with what I am
saying? I am a gastroenterologist, you are the economist, and
so I am kind of relying upon you here.
Besides the two, is there a third reason to do tax reform?
I guess fairness. So if you throw those all in, it seems as if
capital, though, creation of capital, is the one which is not
the priority so much as to align incentives to perhaps create
certainty.
Continue. You go.
Mr. Mnuchin. I agree with you. But the only other thing I
would say, because I do think we have a lot of capital in the
United States now, is that we have a business tax system that
is incenting companies, U.S. companies, to keep that capital
abroad.
So the other thing we want to incent as corporate behavior
is, that money comes back to the United States, both now as
well as going forward, and that money can be deployed to create
new business here and create jobs, and that we stop things like
inversions because it makes economic sense for U.S. companies
to do business here.
Senator Cassidy. So the incentives are both for the company
to use their money more wisely, to invest it within to create
jobs, but also to keep companies from moving abroad.
Mr. Mnuchin. Correct.
Senator Cassidy. On behalf of all those folks in Evangeline
Parish and elsewhere who want to have prosperity, I thank you
for your offer to serve, and I look forward to supporting your
nomination.
Mr. Mnuchin. Thank you very much. I appreciate that.
The Chairman. Well, thank you, Senator; your time is up.
Senator Warner?
Senator Warner. Thank you, Mr. Chairman.
And it is a pleasure to see you, Mr. Mnuchin, and I
appreciated our visit. And congratulations on your nomination.
I have a series of topics, so I am going to try to move
quickly as well.
The United States obviously enjoys enormous advantages,
particularly around the status of us being the reserve
currency. That allows us lower interest rates in everything
from student loans to mortgages. Senator Bennet already raised
this, but I am going to raise it again.
The President-elect's comments about potentially
renegotiating the debt, during the campaign, were
unprecedented. I want you to again affirm to this body that on
a going-forward basis it will be your policy, as much as you
can influence the President-elect, that we would never again
question America's willingness to stand by its debt
obligations.
Mr. Mnuchin. Senator, I agree with that 100 percent. And
also, let me just thank you for meeting with me and also
acknowledge, as an incredibly successful businessperson, that I
appreciate your service here.
Senator Warner. Okay. I do not want that to eat into my
time.
Mr. Mnuchin. Sorry.
Senator Warner. I have been very troubled by even some
folks in elective office who have somehow said we can ignore
the debt ceiling without consequences. There are even some who
are going out and saying somehow we could prioritize those debt
obligations and potentially pay off bondholders, many of them
foreign, many of them Chinese, and ignore our obligations to
pay States, which would then affect their bond ratings, our
ability to pay Social Security trust funds and to honor the
commitments the United States government has made to pay
salaries of FBI employees, et cetera.
Is it your policy that the United States, in terms of its
debt obligations, needs to honor all its debt obligations and
should not have any ability to prioritize those obligations?
Mr. Mnuchin. Absolutely. And I hope you will work with me
so that we get that done. We have already spent the money, we
have the obligations, there should be no uncertainty that we
are paying the bills.
Senator Warner. I think that is extraordinarily important.
And those who somehow argue for prioritization--it would wreak
havoc in the financial markets.
I want to raise again what Senator Bennet raised. Clearly,
if you get this role, words that you say and the President-
elect will say will have consequences. We have already seen
this. The actions of the President-elect in terms of commenting
on the strength of the dollar--unprecedented. No President,
Democrat or Republican, has ever done this before. It has
effects.
Now, you will simply be a senior adviser in the Cabinet of
the President. But how do we ensure, since words have such
consequences, that there will be an ability for the Trump
administration on economic policy to try to speak with a single
voice?
Mr. Mnuchin. Well, if I am confirmed, I think that once we
all get in office and have regular access, both myself and the
administration, I think you will see that. And again, there may
be times where, you know, there is a view that the dollar is
slightly too strong, but I do believe we will speak with a
unified voice.
Senator Warner. But do you then expect the President-elect,
and then President, would continue to break all precedent and
be willing to weigh in on these matters, unlike any prior
President?
Mr. Mnuchin. Well, look, as you know, this President is
willing to do a lot of things that other Presidents have not
done----
Senator Warner. So I will take that as a ``maybe.''
Mr. Mnuchin [continuing]. And I think many of them are
great.
Senator Warner. Let us move to another area. One area that
I have had a huge amount of concern and interest in, and I know
Senator Crapo and a number of us on this panel have, is on
Fannie and Freddie. And I know there were some people who
potentially interpreted some of your comments about recap and
release, which would, in a sense say, even though the American
taxpayer was paid back the $188 billion that we invested in
those failing institutions at a moment of crisis, I think both
of us would perhaps from our business standpoint say that was
high-risk capital and we ought to get a better return, but
somehow those people simply say, let us refloat these two
entities and basically ignore some of the underlying
challenges. Do you support that position of recap and release
that some have advocated?
Mr. Mnuchin. So, I mean, let me first be clear. I did make
some comments about this. My comments were never that there
should be recap and release.
What my comments were--and first of all, I have been around
the mortgage industry for 30 years. I have seen this for a long
period of time, so this is an area that I do believe I have
expertise in.
For very long periods of time, I think that Fannie and
Freddie have been well-run without creating risk to the
government, as well as, they have played an important role.
I know you are running out of time, but just bear with me.
This is very----
Senator Warner. Mr. Chairman, can I get an extra 30
seconds, sir?
The Chairman. Go ahead.
Mr. Mnuchin. Can I just answer this so you get more time? I
believe these are very important entities to provide the
necessary liquidity for housing finance. And what I have
committed to is that I will work with both the Democrats and
Republicans.
What I have said and I believe is, we need housing reform,
so we should not just leave Fannie and Freddie as is for the
next 4 or 8 years under government control without a fix. I
believe we can find a bipartisan fix for these, so on the one
hand we do not end up with a giant bailout, and on the other
hand we do not run the risk of completely limiting housing
finance.
Senator Warner. I appreciate those comments. I look forward
to working with you if you are confirmed.
Mr. Mnuchin. Thank you.
Senator Warner. Since you took most of the 30 seconds on
your statement, I have two quick questions. Hopefully you can
answer them with ``yes'' or ``no'' answers.
One is, in light of those comments about recap and release,
will you commit not to support any kind of administrative
effort that would bypass the Congress in terms of efforts to
recap and release?
Mr. Mnuchin. So, again, I do not want to make any
commitments to legislative action or not. What I will commit
to--because it is my responsibility in Treasury, you know, as
it relates to certain issues with Fannie and Freddie--what I
will commit to is, it is my objective to find a bipartisan
solution to it. And I would welcome the opportunity to sit down
with you on that.
Senator Warner. And your hope would be the bipartisan
consensus that the Banking Committee in particular arrived at,
which was that that solution--and we can argue or discuss about
how we get there--should end up with a housing finance system
that preserves things like the 30-year mortgage, but also makes
sure that there is not the current status which has, when
things are going well, private-sector gain, but when stuff hits
the fan, leaves taxpayers holding the bag? So we would agree
that----
Mr. Mnuchin. I can 100-percent assure you that I have no
interest in that. And I think I understand this well enough
that you will find that I will not support any policy that
makes that case.
Senator Warner. Thank you, Mr. Mnuchin.
The Chairman. Senator McCaskill?
Senator McCaskill. Thank you, Mr. Chairman.
Mr. Mnuchin, I found a tweet of your future boss that I
agree with. ``Keep it fast, short, and direct, whatever it
is.'' So that is what I am going to try to do.
First, do you oppose lifting the current sanctions on
Russia?
Mr. Mnuchin. Right now I do.
Senator McCaskill. You think we should lift the current
sanctions on Russia?
Mr. Mnuchin. No, no, I am sorry. I oppose right now lifting
the current sanctions.
Senator McCaskill. Do you support new sanctions against
Russia, ``yes'' or ``no''?
Mr. Mnuchin. The answer is, I do not have enough
information. I have not been able to receive classified
briefings. I would want to understand the classified
information, and I would want to work with others to understand
it. So I do not have an opinion right now as to whether we
should have more.
I do have an opinion that we should not be lifting the
existing ones.
Senator McCaskill. Would you agree that your new boss is
famous for firing people?
Mr. Mnuchin. Well, he has a show about it.
Senator McCaskill. Okay.
Mr. Mnuchin. But other than the show---- [Laughter.]
Senator McCaskill. Do you think--well, it is a blurred line
at this point. We are not sure where the show stops and where
the reality begins. Do you think he will hesitate to fire
people if he disagrees with them or believes they are doing a
bad job?
Mr. Mnuchin. Well, if he disagrees with them, no. And I can
tell you, the President-elect and I have disagreed on things.
Sometimes I have been able to convince him and sometimes I have
not, and I have not been fired. If people do a bad job,
absolutely he should fire them.
Senator McCaskill. Will he be able to fire and hire the
ethics officer?
Mr. Mnuchin. The ethics officer as it relates to his trust?
I have no idea. I am not----
Senator McCaskill. Who would hire and fire the ethics
officer if it was not him?
Mr. Mnuchin. Again, I do not have access to the trust
documents, and I do not know the answer to that.
Senator McCaskill. Whoa, wait, we are not talking about
trusts. We are talking about--he has said he is going to have
an ethics officer to oversee him in the government. Who is
going to hire and fire his ethics officer? Him?
Mr. Mnuchin. It is a good question. I would be more than
happy to ask him and talk to him about it and come back. I
think you raise an important issue, and I think he will
understand that. I do not have the answer.
Senator McCaskill. He is not divesting any of his business
interests, correct?
Mr. Mnuchin. Correct. I believe he sold his public stocks
and his other liquid investments, from what I----
Senator McCaskill. I am talking about his business. Is it
fair to characterize him as an international businessman?
Mr. Mnuchin. I believe so.
Senator McCaskill. Okay. And he will enjoy the benefits of
his businesses' success while he is President. Correct?
Mr. Mnuchin. Again, I believe he will do everything
legally. And as it relates to international----
Senator McCaskill. No, no, no, no, no. This is not my
question. My question is, he has said very loudly he will go
back to his business after he is President; in fact, he even
said he would fire his sons if they had not done a good job. So
whatever success his business enjoys during his presidency, he
will get the benefit of, correct?
Mr. Mnuchin. I missed the part about firing his sons, but
that sounds like something he may have said. But yes, he is the
economic owner, so by definition I would assume that he would
have that----
Senator McCaskill. His businesses in other countries and
this country intersect with foreign countries. Do you agree?
Mr. Mnuchin. So I have read, yes.
Senator McCaskill. And is it not true that a lot of his
debt is held by foreign interests?
Mr. Mnuchin. I do not know; I have just read it in the
papers.
Senator McCaskill. Do you think you should know that, as
someone who runs the Committee on Foreign Investments, if we
are talking about the Commander-in-Chief? Should you, as
Secretary of the Treasury, know what percentage of his debt--I
am told by people who are familiar with his business that it is
a huge percentage of his debt--is held by foreign interests?
Mr. Mnuchin. Well, as I said, if I am confirmed, I assure
you that I will make sure that the requirements of the
Constitution are upheld. And I think you have a valid point
about foreign debt and understanding foreign things. And if I
am confirmed, I will research that and get back to you.
Senator McCaskill. Okay. So what I want to get a commitment
on from you today is that you will report to this committee
what percentage of the debt against the Trump enterprises is
held by foreign interests. That is your job as the Secretary of
Treasury, and I would like your commitment that you will report
to this committee as soon as you are able to get that
information from the new President.
Mr. Mnuchin. I am not making the commitment today to report
to the committee on anything. But what I am willing to do is,
to the extent I am confirmed, I am willing to speak to the
chairman and make sure that whatever the committee thinks it
needs I will discuss with the President.
Senator McCaskill. Well, I can assure you, the American
people need to know. And you in your job as Secretary of the
Treasury--that is supposed to be determining national security
interests based on foreign investment--the American people want
to know how much debt that is owed by the Trump businesses is
owed to foreign entities, because that could have a direct
impact on our national security.
Thank you, Mr. Chairman.
Mr. Mnuchin. Senator, thank you. And I think you have asked
some interesting questions, which I will follow up on.
The Chairman. Thank you, Senator.
Senator Burr?
Senator Burr. Mr. Chairman, I would love for our staff to
look and see if that is the responsibility of the Secretary of
the Treasury to actually ask the President what percentage of
foreign debt he owes.
I do not think that is part of your job, Mr. Mnuchin.
And let me say that your employment history is quite
complex, probably the most complex I have seen of any nominee
who is here.
What I read into that is that you are sort of a roadmap for
things that we need to do if the goal is a simpler, more
transparent, understandable tax policy in this country.
So let me ask you, do you pledge, do you commit to the
committee, to work towards a simpler, more understandable tax
code in this country?
Mr. Mnuchin. I do, absolutely.
Senator Burr. Do you commit and pledge to this committee to
divest yourself of any assets that may be perceived as a
conflict with the job that you are being considered for?
Mr. Mnuchin. I have already agreed to that and signed the
agreement with the Ethics Office.
Senator Burr. Well, I know that. Many of the questions I
have heard on this committee have suggested that the other side
did not hear it. And I just wanted you to have an opportunity
one more time to repeat it.
Mr. Mnuchin, in April of 2014 the Treasury IG came out with
a study. He found that the Internal Revenue Service has paid
out $2.8 million in bonuses as well as tens of thousands of
hours of leave and hundreds of pay-step increases to employees
who were tax-delinquent or had committed serious misconduct,
including fraud and drug abuse.
More recently, in their April 2015 report, the Inspector
General found that 108 of 364 employees with willful tax
noncompliance cases closed between October 1, 2008 and
September 2013 received one or more awards, promotions, quality
steps, or voluntary separation incentive payments within a year
after being disciplined for tax noncompliance.
Will you commit to me today to change this policy, this
insane policy at the IRS?
Mr. Mnuchin. Absolutely. It sounds very concerning, so I
commit to work with you and your staff on it, absolutely.
Senator Burr. Thank you. In another report, December 2014,
the Inspector General of the IRS discovered that they had
repeatedly rehired employees who were fired for poor conduct
and performance after lengthy examination processes on their
employment. In fact, the Treasury watchdog found that in a
sample of 7,163 employees who were rehired by the IRS, 824, or
11 percent of them, had bad performance in their record as to
why they were fired in the first place. And in some instances,
it said in their records ``do not rehire,'' yet the IRS rehired
them.
Do you pledge to this committee to change that insane
policy at the IRS?
Mr. Mnuchin. That sounds like the most common sense I have
ever heard. So yes, I absolutely am committed to that.
Senator Burr. I appreciate it, because I think that, with
all the questions you have been asked today and all the pledges
you have been asked to make--I try to look for the value to the
American people.
The American people deserve better than this, because, in
the private sector, you would not stand for this, would you?
Mr. Mnuchin. Absolutely not.
Senator Burr. You would not have a company that would pay
people for nonperformance or poor performance. You would not
reward individuals by rehiring them if in fact they did a poor
job last time.
And I think the American people look at insane policies
like this and they really do question those who head agencies
and, quite frankly, committees like this that have oversight
over the agencies.
So I go back to where I started. You have a very
complicated and fascinating employment background that spreads
to probably more areas than any of us can ever imagine. Do you
pledge to use that experience to make the changes at the
Treasury Department and within all the branches of the Treasury
Department that the American people sense need to be changed?
Mr. Mnuchin. Absolutely. It would be a great honor to lead
the Treasury Department and work for the American people. And
that is why I am here.
Senator Burr. Thank you for being here today.
I yield back.
Mr. Mnuchin. Thank you.
The Chairman. Senator Scott?
Senator Scott. Thank you, Mr. Chairman.
Mr. Mnuchin, good afternoon. Good to see you again. Thanks
for coming by the office and having a good conversation about
economic growth, which should be our focus as part of the
Finance Committee and certainly the administration's focus as
well.
To follow up on some of Senator Burr's comments about a
simpler tax code, when I think about many of the comments that
I have heard from the President-elect as it relates to making
sure that the folks working paycheck to paycheck experience a
better quality of life, I think about the tax code. I
specifically think about folks in South Carolina who are
strongly in support of President-elect Trump, as well as places
like Pennsylvania, Wisconsin, and Michigan where these folks
who are working every single day long hours are barely making
it.
As we think about the tax code and reforming it, we can
focus either on income or on capital. I would love to hear your
comments on President-elect Trump's approach to reforming the
tax code. Will the emphasis be on certain cohorts of the
personal code, or will it be more on the capital process?
Mr. Mnuchin. I think it is both. So I think we have an
opportunity to reform the tax code--and we should all be
focused on this--on both the personal side and the business
side.
And in many cases, I see them linked. There will be changes
to the business tax code that will create more jobs and more
income, but I think the overall goal, as we had an opportunity
to discuss--and thank you for meeting with me--is to simplify
personal taxes, deliver a middle-income tax cut, and make U.S.
business taxes competitive with the rest of the world so that
we can compete effectively and aggressively and create more
jobs. This is all about creating better economics and more jobs
for the American public.
I am very concerned about the number of jobs that have been
lost, the decrease in manufacturing, the number of people who
have left the workforce. These are all very concerning issues.
And when you just look at the unemployment rate, that
absolutely does not tell the story of what is going on in this
country.
Senator Scott. Following on that same thread, when you
think about simplification of the tax code--and in order for us
to get to a lower rate, we are going to have to have a serious
conversation and perhaps a challenging conversation about the
expenditures in the tax code--I hope the administration plans
to treat very carefully the mortgage deduction and the
charitable deduction going forward.
I know that the House plan, I believe, capped the mortgage
deduction at a home value of around $1.1 million. I saw at
least in your political document that the approach that you
guys were taking had more to do with the interest that you pay
and not the actual value of the home.
So I do not need a comment right now, but I hope that you
would take seriously the importance of those two deductions,
from my perspective.
Also, I think if we lower the corporate rate, certainly we
will become more competitive. I am not sure that just lowering
the corporate rate actually stops inversions. Your thoughts?
Mr. Mnuchin. I think it absolutely has a huge impact on
stopping inversions. So I think there are some other things
that we may be able to do, but I think the biggest issue that
creates inversions is the incentive for much, much lower taxes
abroad than we have here.
Senator Scott. Well, there is no question that if we can
get our 35-percent highest-in-the-world corporate tax down to
something that is competitive, that would be wonderful.
Mr. Mnuchin. Absolutely.
Senator Scott. But to stop the inversions, we will probably
have to go to a place we cannot get to to be competitive with,
I do not know, a 12.5-percent rate or now the innovation box is
at 10 percent. Whatever we can do to become competitive will be
helpful, but I do believe that we are going to have to look for
other remedies outside of the tax code in order for us to sell
perhaps that the haven of America is a great place to do
business beyond the tax code itself.
But speaking of that simpler tax code, I have--and we have
spoken before about it--legislation that I have sponsored
around investing and opportunities. It essentially defers the
capital gains tax for up to 7 years if you reinvest those
resources into distressed communities.
We have 50 million Americans, more than a million South
Carolinians, living in distressed communities. I think one of
the goals I hope that we have is to look for ways to create
incentives for private capital to come back into distressed
communities. I would love to hear your comments on that.
Mr. Mnuchin. Yes, absolutely. As a matter of fact, I have
in my notes here the Investing in Opportunity Act that we
talked about.
Senator Scott. I am glad you are supporting it. Thank you
very much.
Mr. Mnuchin. And I want to follow up with you and learn
more about it. And whether we use that or whether we use other
tax incentives, I think it is absolutely critical that the
areas that are most struggling, that we use the appropriate
incentives to get business to go there. So I will definitely
look forward to following up with you on that.
Senator Scott. So, one more question, Mr. Chairman?
The Chairman. Go ahead.
Senator Scott. Thank you, sir. I thought that was a ringing
endorsement for the Investing in Opportunity Act. I will just
take it as that, from my ears, not necessarily from what you
said.
But on the trade policy, South Carolina has been a place of
a provocative position on trade. We were a haven for
manufacturing a hundred years ago; we are today a haven from
the high-tech manufacturing perspective.
Trade agreements are a very important part of what makes us
successful attracting brands like Boeing, Michelin,
Bridgestone, Caterpillar, BMW. So trade is very important to
the State.
I know that you guys are moving away from multilateral
agreements towards bilateral agreements. I hope that that
bilateral approach will include some of the countries and the
growing markets around the world, specifically within the TPP
footprint.
Mr. Mnuchin. Absolutely. And as I said, you know President-
elect Trump absolutely believes in trade. He just wants better
deals. So he wants us to grow exports, and he wants better
deals.
Senator Scott. Thank you, Mr. Chairman.
The Chairman. All right. We have two more to go here. Can
we finish up with those two?
Mr. Mnuchin. Absolutely; let us keep going, please.
The Chairman. Okay. And then we will take a short break and
then give you a little bit of time, and then we will come right
back.
Senator Portman and then the Senator from Washington.
Senator Portman. Thank you, Mr. Chairman.
And, Mr. Mnuchin, thank you for being here. But I think it
is your kids who deserve the award for stamina. [Laughter.]
My kids at that age would have been long gone, so whatever
you have done, you have done a good job.
Mr. Mnuchin. I told them they could leave after an hour,
but they actually opted to stay.
Senator Portman. Yes. Well, good for you guys.
Listen, I think you are right about the fact that the tax
code is an opportunity for us to help give the economy a shot
in the arm.
And just to put a finer point on it, you know median income
has not gone up when you look back at the pre-recession levels.
And that is the middle-class squeeze, that and the higher
expenses, including health care.
And then in terms of unemployment, you are right. If you go
back to the labor force participation rate that was in effect,
about 66 percent before the recession, and you compare it to
today, unemployment would be about 9.5 percent. So this economy
is not humming, we are not doing great, and we are not serving
middle-class families who are struggling to make ends meet.
And I think tax reform is one way within your purview that
you can make a big difference here. And I appreciate what you
said in response to Senator Scott on that, because I do think
we should be focusing on wages, not just overall economic
growth but how to ensure that we are creating opportunities for
the families we represent.
One thing you did not talk about, at least I did not hear
you talk about when I was here, is on the business side:
repatriation. So you can lower the rate, and I think that is
important, having the highest rate in the world. But do you not
think there is an opportunity to repatriate some of those
profits that are now locked overseas?
The number I hear is over $2 trillion. What is the number
that you believe and what can be done to bring that money back
here to invest in jobs and plant and equipment?
Mr. Mnuchin. Well, I can tell you the President-elect
thinks that we are going to get over $3 trillion, so his number
is $3 to $4 trillion. So we are getting a lot of money back.
I have spoken to several CEOs who, you know, want to bring
money back. So to the extent that we create a one-time
repatriation in the Trump plan--we had put that at 10 percent.
I think the House GOP plan had that slightly lower.
But I absolutely believe, and I have heard CEOs say this--
and some of them are, without naming names, some of the biggest
holders of cash abroad--they absolutely want to do it, and we
are committed to that.
Senator Portman. You are committed to working with us to be
sure we can do that?
Mr. Mnuchin. Absolutely.
Senator Portman. And I think this has bipartisan support
here. And you know we need to invest those funds back here,
including for things like infrastructure.
With regard to trade, there has been some discussion I
heard on trade. As you know, I believe in expanding exports. I
am a former U.S. Trade Rep. And I think we are not doing enough
there.
But I also believe in a level playing field. And one area
where we have had a lot of contention is on currency
manipulation. We tried in the legislation called Trade
Promotion Authority to get that done. Senator Stabenow and I
actually introduced an amendment which came close, but we did
not quite get it done, to make it a trade objective in our
trade negotiations.
But we did pass something in the Customs bill that directly
relates to your job. It says that Treasury has enhanced
authority to take action on this. There are some conditions
that have to be met that, frankly, trade manipulators will
meet. And at the end of the day, if a country fails to change
its policies, the Treasury Secretary can recommend the
President take action, such as prohibiting the Federal
Government from procuring goods or services from that country,
or calling for formal consultations on findings of currency
manipulation at the IMF, the International Monetary Fund.
If confirmed, would you commit today to take full advantage
of that enhanced authority we have given the Department of
Treasury?
Mr. Mnuchin. Absolutely. I think that is very important.
And in particular, I just want to point out and thank you--
I know you have taken the opportunity to meet with me several
times. And I enjoyed our working lunch yesterday in your
office. And we have talked a lot about these issues. And I am
absolutely committed to work with you on this, and this sounds
like a very important issue.
Senator Portman. Again, I think it is one issue where there
is some bipartisan agreement about the need to address currency
manipulation. And I appreciate your commitment to use the
authority we have given you and work with us on other
authorities.
Another topic I want to touch on is the IRS. I understand
there was some discussion when I had to step out to another
hearing regarding funding for the IRS. I heard what Senator
Burr said about some of the examples of IRS's poor management,
including promotion policies. Obviously, we know that there
were politics involved in the IRS, that they were making
decisions based on political matters, which is totally
inappropriate for a tax collection agency. So the IRS has
created huge problems by the way it has not performed in a way
that anybody would expect as a taxpayer.
On the other hand, by understaffing and underfunding the
IRS, taxpayer service has been eroded, and that affects my
constituents in very direct ways.
Are you committed to trying to fix these problems at the
IRS, but also working with us to ensure that there is adequate
funding and support so that the tax system can work better,
hopefully under a very simplified tax code?
Mr. Mnuchin. Absolutely. And this is something I feel very
strongly about, and it is something that I hope we do have
bipartisan support on, because this is one of the areas where I
think we will all agree: to the extent we add resources, we can
collect more money.
One of the things I have heard is, one of the reasons why
we have technology problems is because, based upon the
guidelines, we cannot afford to hire technology people
internally.
While I think there is some external technology needed, I
think we need to have internal expertise in the IRS to manage
our own technology systems.
And I think in this day and age, like any other entity, we
need to have good customer service, that if people are paying
taxes, they have the right to get the information, they have
the right to understand their information.
I think that we should be able to interact electronically,
securely, keep people's information safe. I can go online and
look up my real estate tax bills in California and see my
information there. I do not see why we do not have good systems
where people who pay taxes can see their information securely
online.
So I look forward to working with you. And I also think
that we should be monitoring customer satisfaction. Like
anything else, we should understand what the taxpayers think of
the service we provide them.
Senator Portman. I know my time is up, Mr. Chairman. I
would just say that the chair and ranking member, I would
assert, agree with me on this, but additional focus on the IRS,
I think, is an opportunity for us.
And 19 years ago, there was this reform effort. I co-
chaired it with Bob Kerrey, who was a Senator at the time; I
was a House member. Every 20 years, it probably ought to be
looked at, you know, including the technology. And I think this
is an opportunity here. I appreciate your comments on that
today and appreciate your being here today, Mr. Mnuchin.
The Chairman. Thank you, Senator.
Mr. Mnuchin. Thank you, and I look forward to working with
you on it.
The Chairman. Senator Cantwell?
Senator Cantwell. Thank you, Mr. Chairman.
And, Mr. Mnuchin, I caught some of your testimony, but I
apologize for being at the hearing with Energy Secretary
Governor Perry for most of the morning, so I missed most of
your----
Mr. Mnuchin. I appreciate it is a busy day and you are
accommodating lots of us, so thank you.
Senator Cantwell. Thank you.
I wanted to ask you, do you support returning to Glass-
Steagall?
Mr. Mnuchin. I do not support going back to Glass-Steagall
as is. What we have talked about with the President-elect is
perhaps we need a 21st-century Glass-Steagall. But no, I do not
support going back as is, of taking a very old law and saying
we should adhere to it as is.
Senator Cantwell. And so, is that the position of what the
Republican platform was? Because I thought it was Glass-
Steagall.
Mr. Mnuchin. Again, the Republican platform did pass Glass-
Steagall at the convention, and the President-elect, when we
talked about policy with the President-elect, his view is that
we need a 21st-century Glass-Steagall.
Senator Cantwell. So when did that change?
Mr. Mnuchin. Oh, that has been, again, that has been part
of the campaign. It has been in some of his speeches.
Senator Cantwell, So, what, like, October?
Mr. Mnuchin. I do not remember.
Senator Cantwell. But after the convention? At the
convention, it was Glass-Steagall.
Mr. Mnuchin. At the convention, the Republican position was
Glass-Steagall.
Senator Cantwell. And so his position was never Glass-
Steagall, is that what you are saying? Or all along he meant a
different version?
Mr. Mnuchin. Again, I can only tell you that, post-
convention, this is an issue that he and I have discussed and
something that we will be looking at, but not----
Senator Cantwell. And do you think that Mr. Manafort's
leaving had anything to do with the change?
Mr. Mnuchin. No.
Senator Cantwell. Okay. So you think that--to me, this is a
very important issue. In fact, I would say at some point in
August that the Republican platform had a stronger position on
Glass-Steagall than the Democratic platform. But now I
understand that the President-elect does not really support
Glass-Steagall, he supports some modern version, which I do not
understand, so maybe you could help me. Tell me what that
modern version is.
Mr. Mnuchin. Again, I think that separating out banks and
investment banks right now under Glass-Steagall would have very
big implications to the liquidity in the capital markets and
banks being able to perform necessary lending.
I think, in terms of looking at a lot of regulatory issues,
the administration will look at Glass-Steagall and what I refer
to as the 21st-century Glass-Steagall and, as part of
regulatory form, have a view as to what is appropriate.
Senator Cantwell. So I just want to be clear, because I
think in your testimony I heard you allude to the damage that
was caused by the implosion of our economy brought on by toxic
financial instruments that did not have the backing that they
needed. According to the Dallas Fed, it is a $14-trillion hole
in our economy. So I think you alluded to the damage that that
caused.
So now, I think you answered--or at least some of the notes
I have here about some of my other colleagues' questions
indicate--that you believe the concept of proprietary trading
does not belong with a bank.
Mr. Mnuchin. That is correct.
Senator Cantwell. Okay. So where does that go then? So you
are saying you do not think that today there is a clear
prohibition and you want to see a clear prohibition?
Mr. Mnuchin. No, no. What I said is that in the Volcker
Rule--today we have a prohibition on proprietary trading in
banks.
Senator Cantwell. With loopholes. With loopholes.
Mr. Mnuchin. The problem that we have is that the
definition of that was left to the regulators to decide. And so
the first issue is--and again, I am a believer in proper
regulation, but I am also a strong believer that people need to
understand the regulation. So we need to be able to explain to
banks what is proprietary trading and what is not proprietary
trading.
I think we would all agree that if we were all sitting in
this room and just betting on things, that is proprietary
trading. What I referenced is, the Federal Reserve had their
own independent report on a lack of liquidity in many of the
important markets.
So what I am in favor of is that we have clear definition
around the Volcker Rule and that the regulators come out with
that and do it in a way so that it does not eliminate liquidity
in many of the important markets.
Senator Cantwell. So you would basically just tighten what
you think are the rules that are out there. So you would lessen
the rules that are already passed in Dodd-Frank.
Mr. Mnuchin. No, that is not what I have said. I want to be
very clear. What I have said is that I support the Volcker
Rule, but there needs to be proper definition around the
Volcker Rule so that banks can understand exactly what they can
do and what they cannot do and that they can provide the
necessary function of liquidity in customer markets.
And again, I am referencing a problem that the Federal
Reserve has independently raised.
Senator Cantwell. Well, I think, to me, I think this
election was a lot about the frustration of the American people
on the implosion of our economy and the fact that they have not
recovered. And I think that the President-elect, whether he
directly or not meant to--I was pleased that his party adopted
coming up with a very bright line separating commercial from
investment banking.
So now, I think where we are today--we are not sure.
Hopefully we will get a chance to vote on this, all our
colleagues, now that our colleagues have to answer to platforms
and committees. Hopefully we will get an answer as to where our
colleagues are on this.
But I will tell you that not only is this an issue of
people wanting to see a bright line and be protected from this
ever happening again, when it comes to the tax code and the tax
policy, the American people have not recovered.
So lowering the corporate tax rate without getting a plan
for the average American who lost pensions, could not send
their kids to school, maybe lost their home--what is the tax
policy that the President-elect and you are going to pursue
that is going to help restore them from that major implosion
and protect them from this ever happening again?
Mr. Mnuchin. Well, let me just tell you, from having
traveled with the President-elect for the last year, I
absolutely understand why he got elected, and that is because,
as you point out, the average American worker has gone nowhere.
The unemployment rate is not real. The average American worker
has gone nowhere, and the President-elect is committed, as am I
as his economic adviser, to work for the American people and
grow the American economy so that the average American worker
does better.
And that is why I have been willing to sell all my
investments, I have been willing to give up my businesses. My
desire is to work for the American people to create a better
economy, and I understand that.
I have traveled for the last year. I have seen this. And
the
President-elect understands that very clearly.
Senator Cantwell. And so just one question on that, and I
know my time has expired.
So did you mention what tax break policy you would give to
that American worker?
Mr. Mnuchin. Absolutely. We have specifically said the
objective is to create a middle-income tax cut and to create
business taxes that incent businesses to grow and make
businesses more competitive and hire more people and create
more jobs here.
Senator Cantwell. So not specific to education or pensions
or anything--a broad tax break to folks?
Mr. Mnuchin. Well, as we had a chance to talk about, I
think pensions are a very important issue.
Senator Cantwell. Thank you.
Mr. Mnuchin. And, you know, I would be happy to work with
your office another time. I think that the people who have
earned pensions absolutely deserve to have those pensions
maintained and be safe. And I am very concerned about the
retiree issue in this country, and that is something that I
look forward to working with you and others on.
Senator Cantwell. Thank you.
Mr. Mnuchin. We need to protect the pension-holders in this
country.
Senator Cantwell. Thank you.
Thank you, Mr. Chairman.
The Chairman. We are going to take a 10-minute break here.
My friends on the other side have requested a second round, and
we are going to grant that. And so let us just recess for about
10 minutes, maybe a little longer.
[Whereupon, at 1:35 p.m., the hearing was recessed,
reconvening at 1:50 p.m.]
The Chairman. My colleagues have asked for a second round,
and we are going to do that. But I hope people will help us to
move this along, so I will reserve any comments that I have to
make.
Senator Wyden?
Senator Wyden. Thank you very much. Let us go back to the
Mnuchin Rule, if we could, Mr. Mnuchin. Let us say Congress
proposed a policy that cut payroll and investment taxes for the
top 1 or 2 percent of Americans while eliminating tax credits
for those with low or middle incomes. That sure looks to me
like a violation of what we agree is going to be called the
Mnuchin Rule: no absolute tax break for the wealthy. Do you
agree with that?
Mr. Mnuchin. So again, I think we want to work on
bipartisan tax reform.
Senator Wyden. That is very specific, and I am asking it
for a reason. I do not want to have to repeat it. If you have a
policy that cuts payroll and investment taxes for the top 1 or
2 percent while eliminating the credits for those who are low-
and middle-income, does that not violate the Mnuchin Rule?
Mr. Mnuchin. Again, I think we need to look at the overall
tax plan, okay? And as I said, the primary objective is to
deliver a
middle-income tax cut and tax simplification on the high end.
That is our objective.
Senator Wyden. You are already fudging on this commitment
that you made to the American people that you would not give an
absolute tax break to well-to-do people. And the reason I am
asking this is because this is exactly what ACA repeal was all
about in the last Congress. And every single Republican up here
voted for it.
So I hope you will think this over, but this is exactly
what troubles me. We have two tax systems in America. We were
nudging our way, saying maybe you would not give a break to the
well-to-do. I am asking you about a specific situation and you
said, gee, I do not know, we will have to go and see.
Now, let me turn to a second area that working-class people
care a lot about, and it involves their purchasing power. There
are a lot of questions about the 35- to 45-percent border tax
that the
President-elect is doing a fair amount of tweeting about. Could
you tell the American people what products would be subject to
this tax?
And I am not interested now in all the complicated theories
about the dollar. I think it is a question worth talking about
and the like. But Americans want to know what products would be
subject to it. Working-class people want to know. Is gas going
to be part of this? I mean, give me your response to this. Are
there any products that are going to be exempt?
Mr. Mnuchin. Well, first of all, thank you, and I think
that is an important issue. And I think that this week the
President-elect came out and suggested that he had concerns
about the House GOP border-adjusted tax. And part of it is the
complexities around it, and part of it is the----
Senator Wyden. I am not talking about what the House is
doing with border adjustment. I want to hear about the border
tax the President-elect has been talking about.
Mr. Mnuchin. He has not suggested a border tax. What he
suggested is that for certain companies that move jobs, there
may be repercussions to that. He has not suggested in any way
an across-the-board 35-percent border tax, and if anything,
quite the contrary.
As you said, he has concerns about things that impact the
price of gasoline and other commodities.
Senator Wyden. So what products would be off the table for
purposes of what I call a border tax and you want to say is
kind of something else? What products that working-class people
buy would be exempt?
Mr. Mnuchin. Again, I think when he has referred to a
border tax, he has referred to a small number of companies that
have moved their jobs, or are moving their jobs, putting
products back into the United States, taxing them.
So he has in no way contemplated a broad 35-percent border
tax. That could not be further from anything he would possibly
consider.
Senator Wyden. Let me turn to another topic of tax policy,
because we are trying to gather at least a bit of information
about how you would deal with some of these common tools that
would be in your jurisdiction if confirmed as Treasury
Secretary.
Now, inequality has grown substantially over the last 30
years. There has been bipartisan support in the past for the
Earned Income Tax Credit. There are a number of proposals
pending now in the Congress. Do you have any thoughts on that?
Mr. Mnuchin. Again, first of all, as I suggested to you
when we met, I hope we can sit down and talk about taxes with
Democrats and Republicans and see where we can agree on
bipartisan solutions.
As it relates to any specific component of this, I think we
need to look at the overall tax reform that we are going to put
through and where things fit in it. But I would welcome the
opportunity to follow up with you and work on that.
Senator Wyden. Mr. Mnuchin, again, I want to be respectful
on this point, because you have not been involved in these
policy fields in the past, and I respect that because there is
lots of leadership that a person still can provide. When I
asked about Medicare--you would be the managing trustee--you
really did not have any thoughts on that.
I just asked you about the Earned Income Tax Credit--
tremendous interest among Democrats and Republicans. I gather
you are not aware that the Speaker has long been advocating
some improvements that Democrats are interested in.
And I will tell you--we are going to have, I guess, the
chance to go into some other questions--I am very troubled
about the fact that regarding these basic tools that you would
have, if confirmed, you seem almost unscathed by the subject.
So thank you, Mr. Chairman.
Mr. Mnuchin. Well, I am sorry that you are troubled by
that. I hope I earn your support and respect and that you are
not troubled going forward, if I am confirmed.
It is not that--again, on the Earned Income Tax Credit, I
do not want to comment on specific legislation on tax. I think
that tax reform needs to be looked at as an overall policy. And
I have laid out a certain framework for what I believe the
President-elect believes in for tax reform, without commenting
on specifics.
Senator Wyden. I am over my time for this round. I hope,
because I am interested in those discussions with you about tax
reform, you are not talking about putting the Earned Income Tax
Credit on the table as something you might throw in the trash
can, because if you do, you are going to have opposition from
me, and you are going to have opposition from the Speaker of
the House.
Thank you, Mr. Chairman.
Mr. Mnuchin. I am not suggesting that. I was just saying I
was not going into the specifics of every single tax item.
Thank you.
The Chairman. Okay. Senator Crapo?
Senator Crapo. Thank you, Senator Hatch.
Mr. Mnuchin, I want to try to cover three quick, maybe not
so quick, questions. The first one is to return back to the
discussion you were having with Senator Warner about Fannie Mae
and Freddie Mac and GSE reform, housing policy reform.
I am sure you are aware that Senator Warner and I and a
number of other Senators on the Banking Committee have worked
for some time on legislation to try to deal with this
circumstance.
We currently have a situation in which Fannie Mae and
Freddie Mac are in receivership. The Federal Government
basically is running them. And the concern that I believe
Senator Warner was referencing was a concern that the
administration--not because we are afraid of anything, just
because we are asking, we are trying to find out--that the
administration may either believe that it is okay to keep them
in receivership and just continue to run as is with the status
quo or perhaps to simply recapitalize them and put them back
out into the market without any housing reforms.
And I just wanted to ask you if you would--I realize you
cannot comment on a specific plan yet, but if you would comment
as to whether you believe that we need to have reform in our
housing finance policies that would go further than simply
recapitalizing Fannie and Freddie or keeping them in
receivership.
Mr. Mnuchin. Okay. Well, again, thank you for that. And I
would comment, unlike the Medicare fund, where I acknowledge I
am not an expert, I think on Fannie Mae and Freddie Mac, I am
an expert. I have been around these for 30 years. I understand
these very well. And that is why it would be one of my
priorities to work with you.
And as I have said, what I am focused on is, we need
housing reform and a solution. So I start from the standpoint
that the status quo is not acceptable of just leaving them
there.
Senator Crapo. I appreciate that.
Mr. Mnuchin. I think, as you know, as we have discussed,
there are two extremes on this. And it is something that I look
forward to sitting down and talking to you about. But I believe
we need housing reform and we need to make sure that whatever
the outcome is on the two extremes that, one, we do not put the
taxpayers at risk and, two, we do not eliminate capital for the
housing markets.
Senator Crapo. Okay.
Mr. Mnuchin. I am very concerned that middle-income people
and moderate-income people who need mortgage loans have access
to that capital.
Senator Crapo. Well, I appreciate that and, in fact, I
agree with you on both of those objectives, and I think that is
exactly what we need to work together to identify.
Mr. Mnuchin. Good. Well, I am optimistic we can work
together and hopefully figure out a bipartisan solution. Thank
you.
Senator Crapo. Thank you.
My second question is--you have already answered it, but I
just want to raise it again because it is so important, and
that is, we have seen the unfortunate circumstance, in my
opinion, in the last few years, of the IRS actually targeting
individuals because of what they believe and how they advocate
in our society.
And you have already talked about this, but I would just
encourage you to make a high priority that not only the IRS,
but all of the Federal functions under your jurisdiction as
Secretary of Treasury, which I am sure you will be confirmed to
be, are stopped from that kind of targeting of American
citizens who are conducting perfectly legal business and
engaging in perfectly free and legal speech.
Mr. Mnuchin. You have my 100-percent assurance that I will
do that. I think there is no place in not only the Treasury,
but in other agencies, for us to be having people act that way.
Senator Crapo. All right, thank you. Then my last question
in this round would be back to the tax issue.
One of the big issues that I think we must grapple with,
and I would just like your ideas on it, is that, as I am sure
you know, a huge percentage, in fact a significant majority, of
the business entities in the United States pay tax through the
individual income side of the code rather than the corporate
side of the code.
And as we reform, as we should, our corporate code and
engage in individual tax code reforms, I am concerned that we
do not end up with a significant bifurcation between different
business entities in the United States as to the tax burden and
the tax rates that they pay. Could you comment on that?
Mr. Mnuchin. Sure. And I, too, think that that is an
important issue. And again, for large companies that are in
pass-through form today, the reason why large companies are in
pass-through form is because they look at the personal income
tax rate and they compare it to the corporate rate and the
dividend rate.
So I think for many large companies that are structured as
pass-throughs, they will opt to take the business tax, and we
will figure out a simple system, nonbureaucratic: you check the
box, you get the business tax; you leave the money in the
company, you grow your company, you get the lower business tax.
If you distribute it out, you pay dividends.
And I think that that is something that is critical.
And as I have said, we will make sure that we work with
Congress to make sure that we close loopholes so rich people do
not use this as a way to get a lower business tax. And on the
other end, we will make sure that small businesses are
protected as well--legitimate small businesses----
Senator Crapo. So the small businesses do not pay an
incrementally higher tax just because they choose not to engage
in the corporate form.
Mr. Mnuchin. Correct. And that is something that we look
forward to working with you on, on the details of how we can
make sure that is preserved.
Senator Crapo. All right, thank you very much.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator.
Senator Nelson?
Senator Nelson. Thank you, Mr. Chairman.
Mr. Mnuchin, you no doubt are aware that one of the things
as Treasury Secretary you will have to face is the multi-
employer pension funds that are in dire straits. These are ones
that have become unstable, and they are pension plans for
people like truck drivers and carpenters and miners.
And the Treasury Secretary has the authority to temporarily
or permanently reduce the pension benefits if the plan is
projected to run out of money. Therein, there are two bad
outcomes. One, it is running out money and, two, you are going
to be faced with the problem of what to do about it.
These are folks who are living on the edge. And a reduction
of the pension is going to mean something that they have to go
without. What do you think about this? And how would you
approach this heart-wrenching issue?
Mr. Mnuchin. Well, I appreciate your concern. And we had
the opportunity to talk a little bit about this when we met.
And I believe your office followed up and sent me some
information on this. So it is something that I look forward to
working with you on.
And let me first say I think that people who have worked
very long periods of time and have built up a pension deserve
to get their pension. That is very important.
On the other hand, we have to be careful that, on the other
extreme, we do not have a bailout of the entire pension
industry and bankrupt the guarantee fund.
But I commit to work with your office. I understand these
issues. I understand the sensitivity of these issues. And I
share your concerns that cutting truck drivers' pensions and
other people's is a very significant outcome. And we should go
to great lengths to figure out if there are other solutions
before we do that.
Senator Nelson. Since folks like you and me have been
blessed, we have not often had to walk in the shoes of folks
like that who are living on the edge.
Mr. Mnuchin. I completely understand.
Senator Nelson. And I ask that, in your position with this
awesome authority as Treasury Secretary, that you put yourself
in those shoes.
Another financial disaster is what is happening in Puerto
Rico, not only because of what they are at fault about, but
also in the unequal way that they have been treated by the law,
quirks in the law, and I do not understand how they ever got
that way. They are not treated the same on bankruptcy laws,
they are not treated the same on Medicare and Medicaid laws.
And they have a particularly tragic situation where they
were given a block grant of Medicaid money that is running out
this year, while at the same time one-third of the island's
residents are infected with Zika. And we know that 15 percent
of those infected with Zika, if they are pregnant, there is a
15-percent chance that they are going to have a deformed child.
I would like very much for you to keep that in mind because we
have to come up with a plan.
Now, I know a lot of responsibility is on us in the
Congress. The chairman led an effort and we tried to get some
things passed in December. But the big things, like Medicaid,
are coming up in the future.
Mr. Mnuchin. Well, Senator, first of all, thank you for
going through that. And when I did have the opportunity to meet
with Secretary Lew and talk about certain issues that he wanted
to advise me on and bring to my attention that he thought I
would have to deal with in the near future, Puerto Rico was
high on that list. So I must say, I was not an expert on Puerto
Rico before the last 30 days. I have started studying this
issue, and I share your concerns.
I am glad that the commission was established. I think that
I understand that the Treasury has been staffing the
commission. I have someone whom I have already asked
internally, who is going to be working with me, to start
working on this and get debriefed by the Treasury staff on
this. And this is going to be something that we need to figure
out a bipartisan solution for.
I am hoping that it can be done in the context of the
commission, but I look forward to working with you on it.
Senator Nelson. Thank you, Mr. Chairman.
The Chairman. Thank you. Senator Menendez?
Senator Menendez. Thank you, Mr. Chairman.
Mr. Mnuchin, I have listened to your responses to my
colleagues, defending OneWest's more than 50,000 foreclosures
on your watch. And I understand you bought a bad book of loans.
And I do not think we are saying that you had to save every
single homeowner. But by taking the FDIC's backstop, you had an
obligation to at least try. So do you believe that you made
every effort to prevent foreclosures and keep families in their
homes?
Mr. Mnuchin. I do. And I actually brought with me--if you
want to make it part of the record--the FDIC asked the
Inspector General, the OIG, to come in and look at the loan
modification program----
Senator Menendez. So you believe you did----
Mr. Mnuchin [continuing]. And they independently reviewed
that and that was verified by the OIG and the FDIC.
Senator Menendez. Well, I do not know that their
determination is that you made every effort. Let me just say,
what about----
The Chairman. Without objection, we will make that part of
the record.
Mr. Mnuchin. Thank you.
[The report appears in the appendix on p. 137.]
Senator Menendez. What about one of your vice presidents
actually admitting to robo-signing 750 foreclosure documents a
week without even reading or reviewing them? How can that be
considered making every effort to prevent foreclosures? Can you
honestly say your bank made every effort to keep families and
seniors in their homes when they were robo-signing one
foreclosure document every 3 minutes?
Mr. Mnuchin. So, Senator, yes, I can absolutely say that we
made every effort. And again, our loan modification programs
were audited by the Treasury, the FDIC, the OCC. You can
imagine, being a private equity person who bought a bank, we
lived in a glass house, and we were constantly viewed by the
regulators.
Now, the comment that you are making--there was an industry
issue which had nothing to do with loan modification, which had
to do with the processing of foreclosures. That was a procedure
that was started at IndyMac; it was continued under the FDIC
ownership. And in the beginning of our ownership, we
unfortunately did not change certain procedures, as I have
said. It was solved, and we were the only----
Senator Menendez. I am not worried about the industry. I am
worried about your direction at your bank. You keep referring
to entities. The Office of Thrift Supervision hit you with a
consent order because you were actually putting homeowners on a
fast track to foreclosure. And that was part of that 750
foreclosures a month.
You also had an independent government audit of OneWest's
foreclosures in 2009 and 2010 that alone identified more than
10,000 homeowners who were owed $8.5 million in damages. And
among those homeowners were 54 incidents over the course of
just 2 years where the bank violated the rights of active duty
military service men and women, those defending our country
across the globe, under the Service Members' Civil Relief Act.
So if you did all of that, how is it that you feel that you
can honestly say here in sworn testimony that your company did
everything----
Mr. Mnuchin. Okay. So first of all, Senator--and I
appreciate the issue--as I said before, we highly regret that
we made even one error, especially to the service men. And yes,
we had all those loans reviewed. We paid $8 million. Many, many
firms paid billions and billions of dollars. But we regret any
issue there.
What you were referring to with the OTS and the independent
foreclosure review, it was one in the same. So as I have
referenced in my testimony, we were one of 14 banks that signed
a consent order; basically the 14 largest services signed a
consent order. At the time, we were under the OTS; it was later
taken over by the OCC who took over the consent order.
And we were the only bank that actually completed that
independent foreclosure review. And we are proud of that.
Senator Menendez. And the fact that it was completed, at
the end of the day, ultimately showed that your company took
people out of their homes and created consequences for them
they should not have. So I am not sure which one is to be proud
of.
Do you know a woman named Sylvia Oliver?
Mr. Mnuchin. I do not.
Senator Menendez. I did not think so. She is from Scotch
Plains, NJ. She is the sister of the immediate past speaker of
the New Jersey general assembly. She received a loan from
IndyMac in 2008. And after her employer cut her hours, she ran
into difficulty paying for her mortgage. She wanted to be a
good borrower. She tried eight times for loan modifications,
which I believe she would have qualified for. Every time, your
bank denied each and every one.
She has been fighting to save her home for 7 years. She
nearly lost her home yesterday. Thanks to her tenacity, she has
a 30-day reprieve, but that is no guarantee she will not lose
her home next week. So I look at her.
And, Mr. Chairman, I would like to have the testimony of
several individuals who faced these realities be included in
the record at this time.
The Chairman. Without objection. If they pertain to the
record, we will certainly do that.
[The testimonies appear in the appendix beginning on p.
129.]
Senator Menendez. They certainly pertain to the record.
They pertain to having been foreclosed on and ultimately having
tried to seek loan modifications unsuccessfully, even though
they should have qualified for them. And I think they are more
than eligible for the record.
So let me just say in closing, I see this as an example of
privatizing profits, but socializing losses. In the darkest
days of the financial crisis, it seems to me that you and your
friends were looking for stores to raid and you found a gem in
IndyMac.
And with the government subsidizing the risk, you
engineered a highly lucrative equation that made billions on
the backs of homeowners, seniors, minorities, and military men
and women.
And so I have a problem understanding how that creates
confidence in the Secretary of the Treasury nominee when you
have to be looking out for every American? And it did not seem
that when you had the chance to do that, and even the
incentive, I would argue, by the backstop that the FDIC gave
you and over $400 million that your company took from HAMP,
which I know you were disparaging before, that that was your
drive.
So I need to be convinced that is going to be your drive
now that you are the nominee for the Treasury Secretary who is
supposed to represent all Americans.
Mr. Mnuchin. Well, Senator, I hope I have the opportunity
to convince you going forward. And I apologize, because I did
not recognize the name, but now that you have mentioned it to
me, it has been postponed, and I do not know any of the
specifics, but as a courtesy CIT did inform me that your office
had requested an extension and they did honor that and give an
extension to revisit that.
And I am not involved in CIT anymore, but I would encourage
you to make sure that you have, again--if there are complaints,
there is a department within the bank that responds to this.
As I said earlier, any complaints that came through any
government or regulatory agencies were responded to very
carefully and reviewed by the OCC.
And again, I would just apologize to the extent there were
any errors whatsoever. That is something that I am very sorry
for. But having said that, we took over a mortgage servicing
business that was not part of what we were trying to build. It
was a mess when we got there. We fixed it; we cleaned it up.
And to the extent that we made errors on some issues, we
compensated people for that as part of the agreement that we
entered into with the regulators, which we think was the right
thing to do.
The Chairman. Senator Carper?
Senator Carper. Thanks, Mr. Chairman.
Mr. Mnuchin, I note you introduced your dad earlier, and he
is still sitting there behind you. How old is your father? How
old is he?
Mr. Mnuchin. Eighty-three? He's 83.
Senator Carper. Well, you are blessed to have him with you.
Mr. Mnuchin. Thank you; I feel that way.
The Chairman. He looks pretty good for 83 is all I can say.
And I am in a position to say that. [Laughter.]
Mr. Mnuchin. I am glad you said that. It is true.
Senator Carper. Well, my parents are both deceased. A
couple of things they used to say to my sister and me when we
were growing up, over and over and over again--I do not know if
your parents ever did that, hoping that it would somehow sink
in. But one of the things they were always saying is, figure
out the right thing to do, not the easy thing. And when it is
the right thing to do, just do it. And they would say, treat
other people the way you want to be treated--the Golden Rule.
My dad was always big on doing things well, doing
everything well. I like to say, if it is not perfect, make it
better. And my dad always used to say, just use some common
sense. He said that to my sister and me a lot; we must not have
had any.
But can you just think of a word of advice that your dad or
maybe your mom has given you over the years that you could have
used or should have used with respect to the foreclosures that
you were facing and what you did? Just very briefly, a word of
advice from them.
Mr. Mnuchin. Well, again, first of all, thank you. I agree
with those many things that you were told. And as I mentioned,
not only has my father had a big influence on me, but my
mother--who has passed away, and my grandparents--in
understanding the importance of hard work.
Again, I can tell you----
Senator Carper. Just give me one, just one good thing from
your mom and dad that applies to what guided you in this
mortgage foreclosure situation, please.
Mr. Mnuchin. Absolutely. And I think kind of, as you have
suggested, that you should treat people as you would want to be
treated: be sympathetic, be empathetic to those people and
understand what they are going through.
Senator Carper. Good. The other thing I would add to that
is, everything I do, I know I can do better. And I think you
have acknowledged that as well.
Mr. Mnuchin. Absolutely.
Senator Carper. It sounds like you guys tried, but we can
always do better.
I want to go back to the issue of how to create a nurturing
environment for job creation, job preservation, with respect to
growing exports--you know, making sure that we get our products
to markets across the world.
The President-elect has, I think--several times at least I
have heard him talk about support for a duty on, like, items
imported from China. I think it is, like, 45 percent; 35
percent duty on items imported from Mexico. I think he may be
also considering an executive order imposing a 5-percent tariff
maybe on all imports.
And I have a question with really three parts. And first,
if the administration chooses to pursue such policies, how
would you prevent those countries affected from imposing
similar duties on American exports?
Second, Mexico is, as you probably know, our second-largest
export market for goods. The top three exports in 2015 were
machinery, electrical machinery, and autos, vehicles. If Mexico
were to impose a 35-percent duty on American exports, do you
have any idea what would be the impact on our manufacturing?
And third, what role would our government have in assisting
those maybe small businesses that were harmed, and even not-so-
small businesses harmed, the workers that might be displaced by
the closing of international markets to our domestic
manufacturers?
Mr. Mnuchin. Well, first of all, those are all good
questions. And let me assure you from my conversations with the
President-elect on trade--and I have discussed a lot of the
trade issues with him. I have also had the opportunity to work
closely with Wilbur Ross over the course of the campaign, who
is also very involved in trade, as well as Peter Navarro, who
will be in the White House.
And trade, I think, as you know, at least certain
enforcement issues of trade, cut across both the Treasury--the
Commerce Department--and the USTR. So I would be working with
those other people on a unified position on trade.
Where the President-elect has talked about it, I have never
heard him talk about 30- or 35-percent tariffs across the
board. I have heard him specifically say, well, if certain
companies want to move their jobs, we are going to specifically
put a tariff on them, okay?
Now, I think that that is something that needs to be looked
at. And I do not think that is a plan that is going into
action. I share your issues, that this is as much about growing
exports as it is about growing imports.
And specifically with Mexico, I think most people
acknowledge that NAFTA was negotiated a long time ago and we
should reopen this agreement.
Senator Carper. Well, actually, we did, and we did it in
the context of TPP, as you know.
Mr. Mnuchin. I understand that.
Senator Carper. And my hope is that, when you all get
settled in, you will go back--and when you are thinking about
renegotiating NAFTA, make sure you understand what has already
been done.
Mr. Mnuchin. I would hope that the starting point is the
work that you have done. And I am optimistic that we can
renegotiate a deal that is both advantageous to us and
advantageous to Mexico, that is a win-win for both countries.
Senator Carper. Good. The last thing: when you are
mentoring and giving advice to the President-elect, another
word of advice from my parents to my sister and me--and it
probably works on the tariffs, the imposition of tariffs--is,
what goes around comes around. You maybe might want to keep
that in mind. Thank you.
Mr. Mnuchin. Just to clarify the record, I am not mentoring
him, he is mentoring me.
Senator Carper. I am not sure----
Mr. Mnuchin. But I do give him advice. I would not qualify
that as mentoring.
The Chairman. Senator Cardin?
Senator Cardin. Thank you, Mr. Chairman.
I want to get to the tax issues for a moment, because we
had a chance to talk about that in my office.
And I think we all would acknowledge that our income tax
rates, personal and corporate, put the United States at a
disadvantage in global competition and it is something we need
to deal with.
We also recognize that, from a business tax point of view,
it is not just the corporate rate, it is also the individual
rate, since 90 percent-plus businesses pay the individual rate.
I want to talk about two standards that I hope will judge
the review of tax reform so that we can have a simplified tax
structure, one that is fairer to the American people.
One, I would hope that you would agree that we do not want
tax reform to increase the size of the Federal deficit.
Mr. Mnuchin. I am taking notes. I do not know if you want
me to answer them one at a time or----
Senator Cardin. Well, the second is that tax reform should
be at least as progressive as our current tax code. That is,
middle-income families should not be asked to pay more in
regards to our tax code.
Mr. Mnuchin. So, again, in both those issues--and I share
your concerns on the first one--again, we do believe in dynamic
scoring, and with the appropriate growth, I think we want to
make sure that tax reform does not increase the size of the
deficit.
And in regards to the second issue, as I have said, in my
discussions with the President-elect--he is very interested in
us providing a middle-income tax cut. That is his priority.
Senator Cardin. And I would just urge you, on the first
part, to recognize that we have to be disciplined as we deal
with the Federal budget. And I would hope we would have
consistent rules in regards to both spending and tax cuts as to
the dynamic effects of those types of activities.
It is a lot easier for us to use the current rules because
they are objective and we have professionals who give us the
ground rules. When we start using subjectivity, it could be
abused, and, at the end of the day, we could have much larger
deficits.
But your point is, you do not want to add to the deficit of
the country----
Mr. Mnuchin. That is correct.
Senator Cardin [continuing]. Through tax reform. And
secondly, you want to make sure that middle-income families are
not disadvantaged by the tax code.
So here is the challenge. We also believe we should be
competitive globally, because you want to grow our economy in
regards to exports. It is difficult to see how you can get that
done within the context of using just income tax revenues.
Because the United States, among the industrial nations of the
world, has a relatively low part of its economy tied up in
government, and yet we have marginal tax rates that are among
the highest in the industrial world. The reason, of course, is
that we do not use a consumption tax and every other industrial
nation uses a consumption tax.
So without bringing in other sources of revenue, we are
going to have a very difficult time getting those competitive
tax rates. So I would just urge you, as I did in my office, to
take a look at a progressive consumption tax.
It is border-adjusted, it does reward savings, and it does
make our tax code not only competitive, but it gives us a
competitive advantage over the industrial nations of the world.
Mr. Mnuchin. Well, again, I appreciated meeting with you
and talking about these issues and will follow up. And again,
under the appropriate growth numbers, as I have said, with
dynamic scoring, we are not looking to grow the deficit. And
obviously, one of the concerns is the size of the debt and how
it has gone up.
In regards to your other issue, you know, one of the
issues--and this impacts trade policy--is we do not have a VAT
tax system, we have an income tax system, and other countries
do. And that is one of the things that the GOP plan looks at.
Senator Cardin. And of course, the rest of the world uses
consumption taxes that are border-adjusted. We use income
taxes. Income taxes are not border-adjusted. That makes it
difficult for us to grow exports. It also, of course, does not
reward savings, which is another important area.
During the best of times, America's savings ratios were not
competitive with other countries. We could use more incentives
for savings, which is the other area that we talked about in my
office, that Senator Portman and I and others have worked on:
to increase the opportunities for Americans to save,
particularly in retirement savings. That, I do believe, would
not be a partisan issue.
And as we are working for major tax reform to try to make
our tax code fairer and more competitive, I would urge you to
work with us on retirement savings and other savings
initiatives that we could make progress on, I think, in a
relatively short period of time.
Mr. Mnuchin. I look forward to working with you. Thank you.
Senator Cardin. Thank you, Mr. Chairman.
The Chairman. Thank you.
I have to apologize to Senator Stabenow. She should have
been next, so we will turn to her now.
Senator Stabenow. Well, thank you very much, Mr. Chairman.
Mr. Chairman, I want to thank you very much for allowing us to
have an opportunity to fully ask questions in multiple rounds.
We really appreciate it and the way you are conducting the
hearing.
The Chairman. I hope we only have two rounds.
Senator Stabenow. So--yes, well, thank you; thank you for
allowing that.
Mr. Mnuchin, this really is a physical marathon, I think,
of endurance in just the nomination hearing, so we appreciate
your hanging in there as well.
Mr. Mnuchin. Thank you.
Senator Stabenow. A couple of different things. First of
all, following up colleagues speaking about jobs going
overseas, this is obviously a very critical issue for Michigan.
We make things, we pride ourselves in making things.
Manufacturing is one of the most significant parts of the
economy.
I have been working for a number of years on a bill that we
call ``Bring Jobs Home Act'' that would end the ability of a
company to write off the costs of moving overseas. I do not
know why, if a facility is closed, the workers and the
taxpayers in the community should pay for the move. And that
certainly seems in line with what our incoming President has
said. Would you support stopping that, right off?
Mr. Mnuchin. I look forward to working with you on that. I
can tell you it sounds like something the President-elect would
like, so I look forward to working with you on that.
Senator Stabenow. Well, I think it is important that we
take step one. Of all of the loopholes that are there, the
first one is, we should not pay for the move. So I appreciate
that and hope that is something that will be embraced.
A different subject: I know colleagues have talked about
pensions, which are critically important. People, you know,
throughout their lives often give up a pay raise to put money
into a pension. This is very serious what is happening to
pensions around the country, and certainly whether it be a
multi-employer pension or single employer pension, I am deeply
concerned about what is happening to people.
We have heard from the GAO in 2013 that if there was a
multi-employer pension fund that became insolvent, a very large
troubled plan, then we could see an estimated benefit paid by
the PBGC be reduced to less than 10 percent of the guaranteed
level. So you would be talking about somebody who worked hard
all their life who should be getting $2,000 a month then could
end up with $125. Seems to me that is a pretty basic promise
that we need to keep. Rather than ask you to comment at this
point, I am going to go on to the other piece of keeping our
promises and ask you to respond to both.
One is a pension and the other is Social Security. As
Treasury Secretary, you will be a trustee, a very important
position. I think it is important to know if you are committed
to upholding the new President's promise in May of 2015 that he
would not support cuts to Social Security.
Mr. Mnuchin. I absolutely support the new President's
promise; that is why I am here.
Senator Stabenow. And secondly, what is a cut? I mean, we
have heard about increases in the retirement age; is that
something that you would support?
Mr. Mnuchin. Again, I have heard the President-elect's
promise, and I would sit down and discuss it with him, and I am
happy to work with you on the specifics. But I have not
discussed the specifics with him, but I know from a high level
how he feels. And just going back to the pension fund issue, I
acknowledge it is a very significant issue and something I look
forward to working with you and your office on.
Senator Stabenow. This is very real for people and came
just as the financial crisis created a serious situation for
people in home values and for financial institutions. We all
know pension funds were involved in that as well and somehow
did not make it to the top in terms of being able to be made
whole. And so I think that is an unfulfilled promise and
obligation that our country still needs to keep.
On Social Security though, there are a lot of ways--I mean,
what is a cut? There are a lot of different ways to look at
this. Whether it is raising retirement age, changing CPI,
progressive price indexing, privatization, cuts in the amount
of benefits, all of these things would reduce a retiree's or
worker's lifetime benefits as they become a retiree, and all of
them are extremely significant.
Just out of curiosity, do you know the average Social
Security benefit per month?
Mr. Mnuchin. I do not. I apologize.
Senator Stabenow. $1,228.12. Not a lot to live on, and for
about a third of the seniors in the country, that is 90 percent
or more of their income. So, thank you very much.
Mr. Mnuchin. It is a very significant issue, and I
appreciate that. And if I am confirmed, I look forward to
working with the President-elect on this important issue.
Senator Stabenow. Thank you.
The Chairman. Thank you, Senator. Senator Brown?
Senator Brown. I have been pleased, Mr. Mnuchin. Thank you
and sorry you had to hurry through lunch.
Mr. Mnuchin. That is okay.
Senator Brown. I saw you sitting in the back room eating a
lunch, probably that you have eaten faster than any time
lately, so thank you for that, and for your patience.
I have been pleased the President-elect is committed to
helping manufacturers. He wants to buy American, hire American.
I am sending him a letter today. This letter that I hold up
will let him know I will be introducing legislation to extend
Buy America to all Federal infrastructure, construction, and
public works projects. If taxpayers pay for it, whether it is a
water and sewer system or a bridge, or whether it is steel or
iron, or whether it is cloth for an American flag in Akron, OH,
over the post office, if taxpayers pay for it, our companies
and our workers should build it. So I just wanted to let you
know of that.
Now I want to talk to you about China. I have never met a
Goldman Sachs banker who wanted to get tough on China. Based on
your Wall Street background and financial dealings, I am
concerned about what I have seen in the past with bankers being
what I would say is soft on China. Let me lay out a couple
things.
Relativity Media is a Beverly Hills company invested in
movies, as you know, among other things. When you were co-chair
there during 2014 and 2015, the company received investment
from Chinese investors in the company's films and partnered
with the government of the People's Republic of China to
promote and distribute Chinese films. China readily admits it
wants to become more powerful by increasing its cultural
influence in this country and expanding its financial stake in
the U.S. film industry. You were a board member of a company
that partnered directly with the Chinese government that
increased their influence in Hollywood. Were you helping China
expand its global power?
Mr. Mnuchin. Let me just first comment----
Senator Brown. And try to make the answer really short if
you can.
Mr. Mnuchin. I know. But I apologize. First of all, I left
Goldman Sachs 15 years ago.
Senator Brown. I know.
Mr. Mnuchin. So just going back to trade, I think of myself
as a regional banker----
Senator Brown. Okay, okay.
Mr. Mnuchin [continuing]. Not Goldman Sachs. As it relates
to my experience with Relativity, the Chinese never invested in
Relativity, and I do not recall them ever having invested in
Relativity films. They did have a small joint venture in China
that was not particularly successful, for what it is worth.
Now in regards to my view on China, I 100-percent support
the President-elect's view that we need to look at China
overall, from a trade standpoint and an economic standpoint and
a security standpoint, and I look forward to working with him
on that.
Senator Brown. That is not--what you said is not from the
reports we get. We will follow up, by mail, or maybe we will
follow up by letter to you to talk about that.
Mr. Mnuchin. I am happy to.
Senator Brown. Let me shift. China, as you know, has great
capacity in production of steel. Their distortion of the global
steel market puts American workers out of jobs. You and the
President-elect talked about that in places like Youngstown,
OH. Will you commit to make public a comprehensive plan to
address global overcapacity in the steel industry within the
first month you are on the job?
Mr. Mnuchin. I do not want to make that commitment, but I
am happy to work with your office on this issue----
Senator Brown. You do not want to make a commitment it will
be the first month, or you do not want to make a commitment
that you will put together a substantive comprehensive plan to
address global overcapacity?
Mr. Mnuchin. I will make a commitment to sit down with your
office and work on this issue and then figure out the time
frame and whether we should be making it public, but I
understand the issue. The President-elect is concerned about
these issues, and we will work with you on this.
Senator Brown. Thank you. I want to follow up on--you said
you left Goldman 15 years ago, correct?
Mr. Mnuchin. I did. 2002.
Senator Brown. You are aware, I think, that during part of
the time you were at Goldman, that you were one of the two
firms--I am not saying you worked on this personally, but I am
saying that Goldman is one of the two firms that managed the
portfolio of the Central States Teamsters Pension Fund. And I
think that you are aware that while Goldman was a manager of
the funds of Central States, the plan lost 40 percent of its
value, more than double the average losses for a defined
pension benefit plan during that period. Due in part to those
losses, in part due to Goldman Sachs's--I would call it
mismanagement of that plan--the Central States Teamsters
Pension Fund, as Senators Stabenow, Nelson, and McCaskill said,
is in distress and at risk of becoming insolvent.
There is a certain irony that, if you are confirmed, you
will be a member of the board of the PBGC, as I think you know,
and responsible in many ways for protecting the pensions of
more than 400,000 working families. You, I assume, do not know
who Butch and Rita Lewis are. They are constituents of mine and
Senator Portman. He worked as a trucker for 40 years. He was a
teamster; he led the Southwest Retirement Pension Committee's
fight against cuts to their earned benefits. He passed away on
New Year's Eve, due to a stroke, which doctors have attributed,
at least in part, to the stress he faced over proposed pension
cuts. His wife lives in southwest Ohio. She has taken up his
fight. She will lose almost her entire pension. So I know you
said you are not for finding a way to make these pensions
whole, but understand that this Congress bailed out Wall Street
banks, including Goldman, and I hope that you will change your
mind on helping make these pension whole.
Mr. Mnuchin. And I appreciate the significance of the
pension issue, and I can assure you I had nothing to do with
that issue when I was at Goldman Sachs.
Senator Brown. I knew that, but that does not make Rita
Lewis feel any better.
Mr. Mnuchin. I completely understand that, Senator; I
appreciate that.
Senator Brown. I just know there is an ideological
antipathy in this body from its more conservative members who
helped the Wall Street banks to help workers like Rita Lewis's
husband.
The Chairman. Well, that is going a little far. I do not
know anybody who wants to do that.
Senator Brown. Okay, Mr. Chairman, I will finish my
comments. There is one more point I want to make.
Last year--I work with some manufacturers concerned that a
metals warehouse owned by your former employer Goldman was
driving up aluminum costs. The Fed proposed rules to reign in
merchant banking authority that allows banks like Goldman to
own these metal warehouses. We have done some hearings on that.
Will you make it a priority to help the Fed finish its merchant
banking rules and to use Treasury's authority to address these
unfair practices?
Mr. Mnuchin. Absolutely. I would be happy to look into that
and work on that.
Senator Brown. Okay, that you understand. Thank you. I
understand Treasury has joint rulemaking authority in merchant
banking. So they have a role, you have a role, and I hope that
you exercise it.
Mr. Mnuchin. Thank you.
Senator Brown. Thank you, Mr. Mnuchin.
The Chairman. Thank you, Senator. I guess, Senator Warner--
or excuse me, Senator Heller, I'm sorry.
Senator Heller. Mr. Chairman, thank you. And, Mr. Mnuchin,
thanks for your patience. It is a long day, but I hope it is
only 1 day. I want to talk--I do not question the President-
elect's desire to repeal and replace Obamacare. He said it, and
I do not doubt it. What I do question is what his positions are
on all the taxes. And as you know, there were a dozen or more
taxes in Obamacare, a trillion dollars, new taxes on middle-
class America. Can you clarify to me the President-elect's
position on the taxes that went along with it? Does he want to
keep them, does he want to repeal them? Give me your best
thoughts.
Mr. Mnuchin. So first of all, again, I just want to
apologize that we did not get back to you on that information.
And I assure you I have read my staff the riot act; this will
be our top priority when we leave today.
Senator Heller. Thank you.
Mr. Mnuchin. In regards to Obamacare, I have not been as
involved in the specifics of the repeal and replace, or
replace, as it relates to the taxes. My understanding is to get
rid of the surcharge on that.
Senator Heller. Obviously there are a number of
controversial taxes in there--the medical device tax, of
course, being one, the Cadillac tax being another--and I want
to kind of hone in a little bit on this Cadillac tax. Because
as you are well-aware, it is a 40-percent excise tax on what
they consider, or deem to be, Cadillac plans, and most people
who have what would qualify as a Cadillac plan do not come
anywhere close to high-end health-care programs. This would
affect 1.3 million Nevadans, 120 million Americans--we are
talking seniors, unions, public employees, go down the list--
who are going to be hit by this 40-percent excise tax. Give me
your feeling on this and your desire to repeal a tax of this
nature.
Mr. Mnuchin. I agree with you, and, as I said, I am not as
close to the whole Obamacare discussion right now, but I will
definitely follow up with you on that, and I agree with your
view.
Senator Heller. Okay. It was postponed 2 years to 2020,
from the work of Senator Heinrich from New Mexico and myself.
We are working hard, and what I just want is a commitment to
work with us as we go forward on this, and hopefully we can
repeal what I consider to be a very onerous tax.
Mr. Mnuchin. All right. It sounds like what you are saying
makes absolute sense, and you have my commitment to work with
you on that.
Senator Heller. Thank you. I want to talk also a little bit
more about housing. Seventeen percent of the houses in Nevada
are currently still under water--17 percent. I want to talk
about the mortgage debt tax, really quickly. The IRS deems it a
gift, today that, if you bought your house for $250,000 and
today it is worth $200,000 and you sell it for $200,000, they
deem that $50,000 as a gift and want to tax you on it. Now
Senators Stabenow, Isakson, and Menendez, we have worked
closely on this, and it expired as of January 1st. We have
reintroduced that legislation to try to eliminate this burden
on the taxpayer. I would like to get your understanding of
this, your feelings on it, where your support would be on this
particular piece of legislation.
Mr. Mnuchin. Yes, you have my commitment to work with you.
If it is not bad enough that the person lost their home, but
then we have to send them a tax bill--I agree with you on that.
Senator Heller. I appreciate your support. Mr. Chairman,
that is all I have.
The Chairman. Senator Warner?
Senator Warner. Thank you, Mr. Chairman. I just want the
record to reflect I would differ with my colleague, the Senator
from Nevada, in terms of characterization of most of the
funding that went in for Obamacare. In terms of the capital
gains surcharge for folks like you and me and the higher-income
surcharge again, for folks like you and me--and I know this has
not been your focus yet--but in any world, in any form of
hocus-pocus, dynamic-scoring scheme, the ability to say we are
going to, as the President-elect has said, maintain the
prohibition against pre-existing conditions, keep kids on their
parent's policies until they are 26, make sure there is
insurance for everybody, and pay for it all, will be a curious
act.
Let me come to my questions, though. I appreciate very much
your earlier comments to me and Senator Crapo about GSE reform.
But I want to clear up one thing. As you are aware, there have
been a number of hedge funds, that, at the absolute demise of
those Fannie and Freddie holdings in the public markets, went
in and bought them cheap. That is what hedge funds do. And they
have then launched a remarkable campaign, both public and
private, of lobbying that is in certain ways, in terms of even
character assassinations of certain Senators, almost
unprecedented. The President-elect and you invested in one of
those funds. The President-elect has divested himself; I
imagine you will divest yourself as well. But again, in light
of your firm commitment earlier not to go with some kind of
recap and release scheme that would greatly enhance those hedge
fund profits, I believe, and then leave the taxpayer
potentially holding the bag if another housing crisis took
place, I just thought you would probably want to comment on
that and reaffirm that commitment that you will be looking out
for the interests of the taxpayers and not some of the folks
who might have invested in it in the past.
Mr. Mnuchin. I mean, first of all, let me just comment. I
have divested my interest in that fund as well already. And as
I said, my job is to look out for what is in the best interest
of the taxpayers, balancing this issue--the need for housing
reform and making sure that we maintain housing liquidity--with
making sure that the taxpayers are not on the hook for that.
And whatever the legal issues are associated with that--again,
as it relates to the entities, I have tremendous expertise on
the entities. As it relates to the legal case of various
holders of different securities, I have not studied that at
all------
Senator Warner. And I would encourage those of us who have
been part of the reform to realize that legal proceedings will
continue.
I want to--you are complimentary on my business background,
and you know, obviously, you have had a great deal of success
in business as well. One of the things I think that business
people oftentimes bring to the political process is a
willingness to look at things afresh. And you as a business
person realize there are two sides of a balance sheet. There is
revenue, and there is spending.
Mr. Mnuchin. Yes.
Senator Warner. Many people come to the political process
and get hired into this process by taking absolutist pledges on
things like revenues. As we discussed in my office, if you
look--I shared with you the data of the 34 industrial nations
in the world. Much to the surprise of many, America actually
ranks 31st out of 34 nations in terms of total revenues as a
percentage GDP, and that affects our tax rates compared to
everyone else. I know you are not going to probably fully
answer this, but my hope would be that you would not, moving
forward in this position, take one of those absolutist pledges
that, in an effort to try to prevent our $19-trillion deficit
from going much higher, with some of these tax reform plans
putting a foot forward, that you are not going to arbitrarily
prevent one whole half of the balance sheet from being
considered in the whole question around revenues.
Mr. Mnuchin. I mean, my only pledge is, I am working for
the American people, and we will be open-minded about looking
at different things. And the good news is, not only do I have,
hopefully, a new view, but we have a President-elect who is
willing to look at----
Senator Warner. Well, I am going to hold you to that,
because the absolutist approach, which never looks at revenues,
leads us to the place where we are right now, where we are
spending, frankly at the lowest level in modern American
history, on education, infrastructure, and R&D, and that is not
a good business plan. Let me go to two other questions really
quickly.
An earlier comment--and I was a little surprised at your
response. Going through the FDIC process with a relatively mid-
sized institution--as I am sure you are aware, Lehman was much
smaller than most of the SIFI institutions--took 5 years in the
bankruptcy proceeding. And in title II of Dodd-Frank, a
bipartisan component of the bill that actually had 80 Senators'
support, there was an acknowledgment that, while we need to
prepare for bankruptcy proceedings and those liquidation plans
that these institutions have to prepare, that if that
proceeding could not take place, or if bankruptcy would not
work, you had as a fallback provision, title II. It would
concern me greatly if you agree with some of the other comments
that that title II reserve that most of the large institutions
actually believe strengthens the systems, you would be in favor
of repealing.
Mr. Mnuchin. Well, again, it is a complicated issue.
Senator Warner. Absolutely. That is why I am concerned.
Mr. Mnuchin. So again, I am not suggesting that we remove
title II tomorrow without having the appropriate bankruptcy
solution. And again, it depends on what is in bankruptcy. So it
depends whether we are talking about a holding company that
just has a bunch of sub debt and equity, or if, you know, we
are talking about the bank. So again, we have had a process to
resolve banks. What, again, I think that we need to look at is
the holding company issues.
Senator Warner. What I would simply point out--the National
Bankruptcy Conference, which is composed of bankruptcy judges,
lawyers, believes, quote, ``orderly liquidation authority under
title II should continue to be available, even if the
bankruptcy code is amended.'' Thank you, Mr. Chairman.
The Chairman. Senator McCaskill?
Senator McCaskill. Thank you. I want to gently take issue
with my colleague, Senator Burr. It is clear that the Committee
on Foreign Investment in the United States does have the
responsibility of looking at foreign investment and whether it
impacts national security. And clearly, as Secretary of the
Treasury, you will have a role in that. And I think it would be
hard to argue that debt owed to foreign entities by the
Commander-in-Chief, the President of the United States, could
not have any impact on national security. I recall that when a
foreign company was looking at buying Starwood, for example, it
was going to go to CFIUS for a decision. And I want to point
out for the record that, if you decide somebody wants to come
in and buy one of President Trump's properties, and if CFIUS
meets and you decide it is going to risk national security by
the location, or who the foreign entity is, the ultimate
decision is--whose?
Mr. Mnuchin. Well, again, let me just assure you, I am
going to take my role as chair of CFIUS very, very seriously.
Senator McCaskill. I know, but if you take it seriously----
Mr. Mnuchin. And as it relates to----
Senator McCaskill [continuing]. Then whose decision is it?
Mr. Mnuchin. Again, as it relates----
Senator McCaskill. Mr. Mnuchin?
Mr. Mnuchin [continuing]. To these different views on the
President's business, again, you know, I will consult with the
internal counsel at Treasury, in the ethics area at Treasury,
and determine--and by the way, the general counsel at the White
House--and we will figure out the right solution.
Senator McCaskill. Do you know whose decision it is,
ultimately, under the law?
Mr. Mnuchin. Yes, I----
Senator McCaskill. And whose is it?
Mr. Mnuchin. It is mine.
Senator McCaskill. No, it is not. It is the President of
the United States'. You make a decision, and then it goes to
the President, and the President gets to decide.
Mr. Mnuchin. I understand, but----
Senator McCaskill. The same guy whom I think is going to
hire his own ethics experts.
Mr. Mnuchin [continuing]. I need to make a decision for it
to go to the President.
Senator McCaskill. Okay, but if you make the decision that
it should go to the President, I just wanted to point out for
the record that, ultimately, it is his call. It is not your
call. But you have a chance to make a recommendation to him.
Mr. Mnuchin. I think we can all acknowledge that we are in
a little bit of a unique situation. We have not had a President
like this, who owns these types of----
Senator McCaskill. No, in fact----
Mr. Mnuchin [continuing]. Businesses and someone who is
willing, again, to come into government and serve the country
as President. And I assure you, we will come back and talk
about these issues----
Senator McCaskill. That's right.
Mr. Mnuchin. I know there are different views here. We will
work with the chairman on this as to the purview of the
committee and the appropriate lawyers on this. Thank you.
Senator McCaskill. That's terrific. And it is different.
And if we think in history that we got the emoluments clause
because a foreign government gave a jeweled snuff box to the
President of the United States, that almost seems kind of de
minimis, in light of how complicated the international aspect
of the holdings that the President is going to stay with
through his presidency. So I do think you are inviting a lot
more questions down the line. And while we are on this
subject--besides being a former prosecutor, I am also a former
auditor. So when I heard the President-elect's pledge about
profits from foreign governments going to the Treasury, my ears
perked up. Because, as you well know, you benefit from income
to your business, even if it is not profitable, correct?
Mr. Mnuchin. How do you benefit from income if it is not
profitable?
Senator McCaskill. Well, let's say you are the Trump Hotel
by the White House and you are losing a million dollars a year
and a foreign government comes in and buys a suite of rooms for
a year, which brings your balance sheet much closer to a loss
of $200,000 a year. Haven't you benefitted from that income of
$800,000 a year?
Mr. Mnuchin. I am following your reasoning.
Senator McCaskill. Okay. So first of all, I think he has
to, in order to make good on his pledge to do this, he has to
pledge to give up all of his income from foreign interests,
unless there is going to be an auditor who is going to decide
if and when Mr. Trump's businesses, that he has not divested
from, are profitable from foreign involvement. Who is going to
make that call? Is that going to be his family? Is that going
to be his ethics officer? Is there anybody who works for you
who is going to take a look at how he is determining whether or
not he is profiting off foreign involvement in his wide variety
of interests across the globe?
Mr. Mnuchin. Again, I think you have raised some very
interesting comments, and I would be happy to follow up with
you. And I am sure the President-elect will put out more
information on this, and I am happy to inquire with him. So, I
understand your issues.
Senator McCaskill. Mr. Mnuchin, is there anyone who has
income under $200,000 who will receive even a dime from
repealing Obamacare and the tax cut that goes with it?
Mr. Mnuchin. Again, I think we are looking at overall tax
reform, okay?
Senator McCaskill. My question is about repealing
Obamacare.
Mr. Mnuchin. This is just one aspect.
Senator McCaskill. In repealing Obamacare, you are going to
repeal the taxes that are in Obamacare that strengthen Medicare
and do all those things. If you repeal Obamacare, it will be a
tax cut. My question is, will anyone who makes less than
$200,000 a year receive even a dime from that tax cut?
Mr. Mnuchin. Again, I think we are going to look at tax
reform overall and what it does. When Obamacare was put in, it
was a tax hike on those people.
Senator McCaskill. People who make over $200,000 a year?
Mr. Mnuchin. Yes.
Senator McCaskill. No question. I mean, most of it was on
people who make more than a million a year. So the answer is,
not one dime of the tax cut that the Congress--the Republican
Congress--is about to do on the repeal of Obamacare will go to
one American who makes less than $200,000 a year.
Finally, let me talk about pensions. You supported the bank
bailout; so did I. You supported the stimulus; so did I. And we
talked about this in my office. I think we both agreed it was
necessary in light of what our country was facing. But to the
pensions, you have an incredibly important role in the
stability of guaranteed pensions in this country in the new job
that you seek. I have 32,000 people in my State who worked hard
for decades, most of them driving trucks. And they planned
their lives around their pensions. My question to you--we can
fund the bailout for the banks and we can provide stimulus; we
can do an awful lot of things around here to help a lot of
people who have a lot of money. Will you commit to meet with
some of the truck drivers from my State so they can look you in
the eye and explain to you that the guarantee of their
pension--you know, your new boss did an amazing job connecting
with people like these Missourians all over the country. He
looked them in the eye, and he said to them, ``I'm not going to
leave you behind.'' I want to hear from you----
Mr. Mnuchin. I would be happy----
Senator McCaskill [continuing]. That you are not going to
leave these people behind.
Mr. Mnuchin. What is will say is, I will commit to meet
with them, and I will commit to work with your office on
figuring out what is an appropriate bipartisan solution to this
issue, and that I appreciate the pension issue we have talked
about several times today is a significant issue.
Senator McCaskill. Thank you, Mr. Mnuchin.
The Chairman. All right. Senator Casey?
Senator Casey. Thanks, Mr. Chairman.
Mr. Mnuchin, I want to start with a question you have no
doubt come across in your preparation, and it may have been
raised today and I did not hear, in the back-and-forth we had
today, being at other hearings, other appointments.
Currency manipulation, which is--I mean, the simple way for
me to describe it in the context of Pennsylvania is, when a
country like China cheats on their currency, Pennsylvania loses
jobs. That is irrefutable, and that has unfortunately been an
all too common occurrence. Maybe not at this moment, but when
it happens, it is a substantial hit to workers and companies
across our State.
Let me just get some basics down. In terms of the posture
you have taken, the predisposition you have on this issue, were
you to be confirmed as Treasury Secretary, first, this basic
question: do you believe that currency manipulation is a
violation of international trade laws and that a country that
engages in that activity, that behavior, should be held
accountable?
Mr. Mnuchin. Yes, I do.
Senator Casey. Second, while China's currency policies have
shifted of late, would you commit to me, and to this committee,
that if China began to manipulate its currency again, that you
would recommend to the President that the government formally
name China a currency manipulator?
Mr. Mnuchin. I would.
Senator Casey. And I am happy to hear you answer ``yes'' to
both of those, because this is the kind of issue that cuts
across both parties, cuts across all different points of view.
I want to move to some tax issues. You and I, when you came
to my office, talked, not extensively, but for a little while
about tax reform and your perspective on that. In particular I
wanted to focus on the middle class. Many in the incoming
administration have talked about trying to help the middle
class, and correct me if I am wrong, but I think you have
repeatedly said that you want to provide middle-class tax cuts,
is that correct?
Mr. Mnuchin. That is correct.
Senator Casey. What specific provisions would you support
as Treasury Secretary that would get to what you would define
as a set of policies, or trade policies, that would provide
that kind of middle-class tax cut?
Mr. Mnuchin. Well, I think there are two different issues.
I mean, there are trade policies and there are tax policies. So
I see the trade policies as doing things that are beneficial
for the American worker and American companies, and I see the
tax policies as things that will incentivize businesses to be
competitive here, as well as simplify the personal taxes and
reduce middle-income taxes.
Senator Casey. Well I hope we can be more specific, because
I think the American people need to know that when any deal is
reached in this town as it relates to taxes, whether it is tax
reform or whether it is something more limited, that the middle
class does not get left behind, as they often have in tax
policy.
I shared with you that piece from The New York Times this
August by Neil Irwin; I think it was August 12th. I remember
the date because of how stunning it was when he did the
analysis of then-candidate Trump's tax proposal, which was
really an embrace of the Republican House tax plan. The middle
class got .2 percent, big bonanza there, and the top 1 percent
got 5 full percentage points. Now you may debate and say Neil
Irwin's piece was wrong, or other analyses are wrong, but I
hope that, at the end of a period of time when this
administration is working with a Republican Congress and has an
agreement on taxes, I would hope that we would not see that
kind of a bonanza, a giveaway, almost an unfettered giveaway,
to the very, very wealthy.
The last question I have gets to the basic concern a lot of
us have, which is that you are seeking to be, not just part of
a cabinet, and not just part of a government, but arguably one
of the top two or three positions in a new government at any
time. I think that has been true since the time of the
founders. And one of the reasons why a lot of us have concerns
about your record or concerns about your work and concerns
about your views is that you have not been through the
scrutiny, frankly, that public officials go through, even
appointed public officials. I know you are in the midst of that
now, and I know it is a lot.
Tell me, in terms of your whole, either life experience, or
work experience, what qualifies you, or what has prepared you,
not just to fulfill the duties of the office--that is one
question that is worth a significant review, as we have tried
to do here today--but tell me what prepares you and what part
of your life is relevant to the question of preparing to do
public service in one of the most complicated departments of
the most complicated government on the planet Earth, the
Federal Government of the United States?
Some people would point to experiences they had outside of
their day-to-day job. But tell me what you think prepares you
to do public service, in addition to the duties of the Treasury
Secretary?
Mr. Mnuchin. Well, let me first comment on--I do think I
have gone through an incredible amount of scrutiny on my
investments and my private life, as part of doing this.
Senator Casey. That is part of the deal. I mean, that is
part of----
Mr. Mnuchin. I am just saying, that is part of the deal,
and I have fully disclosed everything, as you know. I consider
it a great honor to be able to serve the country. And I think
going back from the beginning of time, the idea that citizens
would come into the government and serve the people--that is
something I am doing. And it is no different than President-
elect Trump. He has been a business man, and he decided to step
away from his business and serve the country. And he spent the
last 2 years campaigning and being on the road because he wants
to serve the American people. And I share that desire.
In regards to what has prepared me, I have had several
different careers. At Goldman Sachs I had tremendous experience
in both the financial markets and in technology. I think both
of those are very important things and expertise for a Treasury
Secretary to have. After that, I have been in the investment
business, and, more importantly, I have been a regional banker.
I think that being, actually, a regional banker who has lent
money, I think that I have a unique combination. Unlike Hank
Paulson, who just ran a big investment bank, I ran a big part
of Goldman Sachs. I had trading experience, very similar to
what Bob Rubin did, who was at Goldman Sachs and served the
country. And on top of that, I have had the added benefit of
actually being a regional banker and lending to companies, and
that is something that I have been doing. And on top of that, I
have worked very closely with the President-elect; I think one
of the important parts of this job as the Treasury Secretary is
to have a close relationship. I view my job as serving the
President and being a conduit between the President's mission
and between the Senate and the House. And I think I have a
unique set of skills, and that is why he has chosen me for the
job.
Senator Casey. Well, I just would add to my earlier
comments in this way: this is public service. It is not just
being able to fulfill a duty or a job. You are a servant of the
people. There is an inscription on a building in the State
capital in my home State of Pennsylvania--it is a building I
worked in for 10 years--and it describes public service the
best way that I have ever seen. It says, ``Public service is a
trust given in faith and accepted in honor.'' And that
``accepted in honor'' part is challenging for all of us. So I
just hope that you bear that in mind, were you to be successful
in the confirmation process.
Mr. Mnuchin. Thank you.
Senator Casey. Mr. Chairman, thank you.
The Chairman. Senator Menendez has one more question he
would like to ask, and hopefully he will be the last one to
ask.
Senator Menendez. Thank you, Mr. Chairman.
You have heard a lot about pensions here, and I care about
American workers and their pensions. And you served as director
of Sears Holdings, which is the parent company of Sears and
Kmart for about 12 years. You served on the finance committee,
which was tasked with reviewing investment policies of the
retirement plans of the company and its subsidiaries, is that
correct?
Mr. Mnuchin. That is correct.
Senator Menendez. And the chairman and CEO of Sears
Holdings is a gentleman named Edward ``Eddie'' Lampert, whom I
understand is your former college roommate?
Mr. Mnuchin. Actually, the benefit is, he is here with us
today.
Senator Menendez. Okay, good.
So you are also an investor in the hedge fund ESL
Investments, which you are choosing not to divest yourself of,
as I understand from your disclosure. The hedge fund is also
run by Mr. Lampert. You earned up to $26 million from the hedge
fund last year, according to your disclosures. That same hedge
fund currently holds 29 percent of its portfolio in Sears
stock, and Mr. Lampert himself effectively owns 49 percent of
Sears stock, according to public SEC filings. Are those all
fair statements?
Mr. Mnuchin. I think actually I have invested close to $26
million; I did not make $26 million.
Senator Menendez. Okay, I equivocate with you. Now Sears
has been performing poorly and, as a result, was forced to sell
assets to cover operating costs and to contribute to its
pension fund. Interestingly, several of the most valuable
assets have been sold in part to Mr. Lampert's hedge fund,
including Lands' End, Sears Canada, and most of Sears real
estate. The real estate was sold off to a different entity
whose largest shareholder is Mr. Lampert's hedge fund. And that
seems to have resulted in a shareholder lawsuit, according to
SEC filings.
The Pension Benefit Guaranty Corporation initiated an
agreement with Sears to protect the pension benefits of more
than 200,000 plan participants after the real estate deal and
significant cuts to pensioners' health subsidies; that occurred
during your watch. Unfortunately, the agreement with the PBGC
puts the plan's pensioners behind Mr. Lampert's hedge fund in
the ability to get assets from Sears in any bankruptcy
proceedings. Because of this, because Sears has received at
least $800 million in secured loans from Mr. Lampert's hedge
funds, some of them secured by Sears properties, the Sears
pension fund currently faces a $2.1-
billion funding obligation gap.
Now I take all this from filings and public reports, and I
assume that basically is a fair statement.
Mr. Mnuchin. That sounds about right, but let me----
Senator Menendez. Let me get to my question----
Mr. Mnuchin. Okay, thank you.
Senator Menendez [continuing]. Then I am happy to hear your
answer.
Are you aware that, if you are confirmed as Treasury
Secretary, you would become one of three board members of the
Pension Benefit Guaranty Corporation that has the power to
either accept or deny a pension plan termination application,
such as that which could occur with a Sears bankruptcy, making
the Federal Government cover Sears' pension tab? Do you
recognize that you are going to be part of that board?
Mr. Mnuchin. Yes.
Senator Menendez. You do. So, here is where my concern is,
and maybe you can elucidate it for me.
You were a director at Sears for 12 years, where you had
oversight over the administration and investment into the
pension fund. That pension fund has been underfunded. Its
benefits were cut during the time period that you were there.
It now faces a $2.1-billion funding obligation gap. Sears has
sold off some of the most valuable assets while you have been
on the board. Your college roommate's hedge fund has large
interests in the properties sold, numerous secured loans with
Sears, and owns a controlling share of Sears stock shares. You
earned up to $26 million last year from your shares in that
hedge fund, and you are refusing to divest yourself of the
hedge fund.
Should Sears go bankrupt, and you, if confirmed as Treasury
Secretary, are a PBGC director who will have a role in the
Pension Benefit Guaranty Corporation's attempts as an unsecured
creditor to recover $2 billion for the unfunded liabilities in
the Sears Pension Fund, while simultaneously trying not to lose
money in your hedge fund investments in Sears that you hold
with your college roommate, who is the CEO of Sears, how is it
that you are going to do that?
Mr. Mnuchin. So again, let me just correct again, because
you said again that I made $26 million, which I did not. I
invested $26 million, so I just want to make sure that the
record states that.
Let me first say that my original involvement with Mr.
Lampert was in Kmart coming out of bankruptcy, where all the
professionals thought that Kmart should be liquidated, and Mr.
Lampert, and I working for him, saved tens of thousands of
jobs. Sears, when he bought it, was already a failing issue,
and the company has contributed multi-billion dollars to that
pension fund, which had pension issues beforehand.
So I am well-aware of the pension issues, and that was
something that, when I was on the board, we were very cognizant
of and made very significant contributions. And then as it
relates to your question, obviously I will recuse myself in any
way as it relates to being on the board, if indeed there ever
were an issue with Sears. Whether I had an investment in ESL or
I did not have an investment in ESL, I would be concerned about
any appearance of conflict. So I would recuse myself.
Senator Menendez. Well, we will have to look at the
consequences of any such recusal, because there are three
members of the board who get a vote. And if you recuse yourself
under that set of circumstances, I am not sure that the
remaining two can ultimately make a decision on such a case
which involves 200,000 people's pensions. So, it is a serious
issue, and I urge your attention to it, in terms of thinking
about how this very well may happen, because those pensions
were underfunded and now we are going to have a set of
circumstances at some point where we are going to have to deal
with it. And so I bring it to your attention, because I think
it is a serious challenge.
Mr. Mnuchin. And again, I will work with the ethics office
and the general counsel to work through that. And again, I
would just comment that Sears inherited, when it was purchased,
an underfunded pension fund and has contributed billions of
dollars to this along the way.
Senator Menendez. It may have inherited it, but----
Mr. Mnuchin. Thank you for your concern.
Senator Menendez [continuing]. But by the same token, it
continued to underfund it.
The Chairman. All right. Senator Wyden is going to give his
closing remarks, and then I will give mine.
Senator Wyden. Thank you, Mr. Chairman. I want to review
for the committee and colleagues where I think we are, both
from the standpoint of process and from the standpoint of
substance.
Now, Mr. Mnuchin, a month ago you signed documents and an
affidavit that omitted the Cayman Islands Fund, almost $100
million of real estate, six shell companies, and a hedge fund
in Anguilla. This was not self-corrected. The only reason these
came to light was, my staff found them and told you they had to
be corrected. Now, I hope you will make another correction
based on what I heard today. When we talked about the Anguilla
fund, and I asked about whether you pursued this for the zero-
percent tax rate, you said that it was really all about helping
churches and pensions. Your words, not mine. I have an SEC
document that indicates your help for a lot of private
investors as well. So I hope that you will take the comments
you have made today, which I think led most people, and all who
listened in, to believe that you were helping just churches and
pensions so that they will get the exact facts. And the SEC
document lays that out.
Now from the standpoint of substance, the Mnuchin Rule
sounded promising to me when you said it the first time: no
absolute tax cuts for the wealthy. So I, and other Senators--I
thought Senator McCaskill's remarks were very good, probably
considerably more eloquent than mine, when she asked about the
ACA. Because, when you look at the ACA, it is really a Trojan
Horse for tax cuts for the well-to-do. And both she and I
pointed out that well-to-do people would get payroll tax cuts,
and it would really be paid for by the working class losing
benefits. And throughout the afternoon, when anybody asked a
question about tax policy, Senator McCaskill, myself and
others, you said, ``Well, it all has to be considered as part
of this big tax architecture;'' your words, not mine. And you
said this pretty much in response to any policy question. I am
not clear whether you knew anything about the Earned Income Tax
Credit, for example, and certainly, if you did, you can include
that for the record as well. But your point there was, it has
to fit into the overall tax architecture. Well, the Tax Policy
Center, which is the center that does objective analysis,
indicates that the Trump plan, which you have been part of,
would add billions--excuse me, trillions--to the debt and would
disproportionately--it provides a tax cut to everyone, but it
would disproportionately favor the well-to-do. And that really
gets me to my last point, the point that I am really walking
out of here with.
I feel very strongly about the tax system in America just
being a broken, dysfunctional, rotting economic carcass. My
wife usually says, ``Stop there, because you're just going to
frighten the children.'' So I am interested in fixing this, and
I can tell you are interested in fixing it as well. And I think
I mentioned to you in the office that with Republican Senators,
including one whom the President-elect wants to have run the
intelligence field, Dan Coats, I wrote a bipartisan bill. But
the hallmark of that bipartisan bill is, it would give
everybody in America the chance to get ahead. It would not just
be stacked all in favor of the most well-to-do. And as far as I
can tell with respect to your views, your views indicate that
you do not share that kind of commitment to the kind of
bipartisan tax approach that Dan Coats, Judd Gregg--Mitch
McConnell's economics lieutenant--and I all put together. That
is what I am walking out of here thinking about.
I am open to being persuaded, certainly, if I have missed
something. It would not be the first time. But it sure looks
like that tax world where there is one set of rules for the
cops and the nurses and another set of rules for people who are
well-connected, who can pretty much pay what they want, when
they want, and maybe nothing at all, that system is still going
to be pretty much alive and well with your approaches to taxes.
So I appreciate having had this chance to discuss it today, and
thank you for your time, Mr. Chairman.
The Chairman. Thank you, Senator. For the good of the
order, I want to note that I have numerous letters and hundreds
of signatories in support of Mr. Mnuchin's nomination. The
support includes representatives in the banking industry, from
small committee banks to the American Bankers Association;
letters from groups of small business owners to the National
Asian American Coalition to the National Diversity Coalition
for families for a better America; individuals from churches,
non-profits, and businesses; and business associations serving
predominantly minority communities all over the U.S. are also
included in the support for Mr. Mnuchin for the position of
Treasury Secretary.
Now several of the letters, with some from people who are
not personally acquainted with Mr. Mnuchin, applaud, among
other things, Mr. Mnuchin's loan modification efforts when he
had ownership in OneWest Bank. Now, without objection, the
letters of support should be included in the record, where I
think they should be.
[The letters appear in the appendix beginning on p. 104.]
The Chairman. Now, let me just say this. I want to thank my
colleagues on the committee for their participation here today,
and I especially want to thank Mr. Mnuchin for his patience and
willingness to go through this long ordeal. If nothing else,
Mr. Mnuchin, I think you should be commended for your
endurance. As is typically the case with Cabinet nominees for
an incoming administration, the timeline for written questions
is going to be somewhat abbreviated. Well, I hope everybody
pays attention to this: I asked that members submit their
written questions for the record by 5 p.m. on Saturday, January
21st.
I am appreciative of you and your family being here and
others who are in support of you, and frankly, I think you have
handled yourself very, very well with very difficult questions
by some of my colleagues--some of them really well thought-out,
very interesting, and good questions. But you handled yourself
very well, as well as any nominee for Treasury that I have seen
in the whole time I have been on this committee. And we have
had some really good people who have been well-known and are
still well-known and who brought a lot to the table. I do not
know that anybody is bringing as much to the table as you are.
So, I am just hoping that you can help this country to get
through its ordeals that it is going through right now,
especially the economic ordeals. And I hope you will be a
tremendous influence with our President-elect. I know he wants
to change things, and I hope that he can. I hope we can get
this thing at least going in the right direction in this
administration, and if we can, I have a feeling you are going
to be one of the reasons we do. So I am just personally very
grateful to you for being willing to give your time to this.
I remember our discussion in the office. I said to you,
``You're going to lose a lot of money taking this job.'' And
your response was, ``I don't care. I want to serve my
country.'' And you are going to lose a lot of money. When you
have had to sell off all your assets and so forth, you have
made tremendous sacrifices to take this job. And I hope that
our colleagues on both sides of the aisle will fully realize
that, and realize how lucky we are to have people like you who
are willing to give your life's work to something like this,
because you love the country. And you are hoping that we can
pull this country out of the, not only the fiscal and financial
mess that we are in, but out of some other messes that
literally exist that we really have to change.
So with that, I want to thank you for your patience. I want
to tell you that you have certainly impressed a lot of people
here and especially me, and we are going to help you get
through this ordeal and also help you when you are there. So
just know that you have friends here on this committee, on both
sides of the aisle, and for good reason. We all know that this
job is one of the most important jobs in this country's
history, and I think you are the man for it, and I just want to
personally commend you and thank you for doing this.
With that, we will recess until further notice.
Mr. Mnuchin. Thank you very much.
[Whereupon, at 3:26 p.m., the hearing was concluded.]
A P P E N D I X
Additional Material Submitted for the Record
----------
Submissions for the Record From Hon. Robert P. Casey, Jr.,
a U.S. Senator From Pennsylvania
From WTAE Pittsburgh
Trump Pick for Treasury Secretary Foreclosed on Hundreds of Homeowners
in Western Pennsylvania
OneWest Bank under Steven Mnuchin called ``foreclosure machine'' by
some.
January 16, 2017
By Paul Van Osdol
Investigative Reporter
PITTSBURGH--Critics say President-elect Donald Trump's pick for
treasury secretary, Steven Mnuchin, ran a foreclosure machine at a
major bank.
Mnuchin was CEO of OneWest Bank. Action News Investigates has learned
that bank foreclosed on hundreds of homeowners in western Pennsylvania
while Mnuchin was CEO.
Nellie Mlinek lost her husband to cancer. She lost her son to an
overdose. And then she lost her home to OneWest Bank.
``One thing I'll never get over is my son's death,'' Mlinek said.
Her son, Joseph, died of an accidental overdose in 2011. It devastated
her emotionally and financially. Joseph was living with her and helping
pay the mortgage on her home in Ruffs Dale, Westmoreland County--the
house built by her late husband and their two sons more than 30 years
ago.
She asked OneWest to help her keep the house by adjusting her payment.
But she said the bank refused and then foreclosed on her.
``They should have worked with me to meet a payment that I could
make,'' Mlinek said.
She filed for bankruptcy but even that could not save her house. She
said it's caused her ``a lot of depression.''
She has plenty of company.
A house in White Oak was foreclosed in 2014.
A house in North Versailles was foreclosed in 2013.
A house in Penn Hills was foreclosed in 2012.
A Pittsburgh house was foreclosed in 2011.
All of them were foreclosed by OneWest or a subsidiary while the bank
was run by Mnuchin.
``Mister Mnuchin ran a foreclosure machine at OneWest,'' said Paulina
Gonzalez, of the California Reinvestment Coalition, which has
documented OneWest's track record nationally.
In one case, the group studied foreclosures on reverse mortgages, which
primarily go to the elderly. Dozens of Pittsburgh-area homes foreclosed
by OneWest had reverse mortgages.
The coalition found OneWest held 17 percent of all reverse mortgages
nationally but the company was responsible for 39 percent of all
reverse mortgage foreclosures.
``It calls into question the practices of this bank and again, are they
callously foreclosing on seniors? Are they cutting corners if they're
foreclosing at twice the rate they should be?'' Gonzalez said.
Mnuchin refused to be interviewed. His spokesperson, Tara Bradshaw,
said some government reports show OneWest forgave delinquent borrowers
more often than bigger banks. She also said OneWest had an ``extremely
low error rate.''
``Anyone who attacks Steven Mnuchin over his track record in saving the
homes of delinquent borrowers either doesn't understand the facts or
has a blatant political agenda here,'' Bradshaw said.
Action News Investigates found some instances in western Pennsylvania
where OneWest was sued because of errors it allegedly made.
In one case, a Venetia homeowner said OneWest violated Federal law by
``hounding'' him and making ``false and misleading statements'' by
demanding money he did not owe. The case was settled.
In another case, an Oakmont homeowner said OneWest called him 56 times
over 2 months causing ``emotional distress'' and a ``blatant disregard
of the law and the orders of this court.'' That case was also settled.
Mlinek voted for Trump. Now she's having second thoughts.
Reporter Paul Van Osdol asked what she would like to tell Mnuchin.
``I would tell him there's many, many more people like me that he's
dealt with, and you've got to have a heart,'' Mlinek said.
Mnuchin left OneWest last year after it was taken over by CIT. He
walked away with $10.9 million in severance pay.
His track record at OneWest is expected to come under a microscope when
the Senate holds hearings on Mnuchin's appointment as treasury
secretary.
Making Home Affordable: Summary Results PProgram Performance Report Through September 2013
HAMP Modification Activity by Servicer and Investor Type
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Active Trial Total Active Modifications
HAMP Permanent Modifications Active -------------------------------------------------------------------
Servicer Trial Plan All HAMP Trials Modifications Active Trial Lasting 6 Permanent
Offers Extended Started Started Modifications Months or Modifications GSE Private Portfolio Total
Longer
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Bank of America, N.A. 582,295 250,251 113,118 5,478 1,594 76,886 24,791 41,849 15,724 82,364
CitiMortgage, Inc. 222,027 142,646 70,462 3,467 1,148 52,864 32,633 6,193 17,505 56,331
JPMorgan Chase Bank, 434,710 322,240 191,097 5,775 1,007 145,440 67,176 53,361 30,678 151,215
N.A.
Nationstar Mortgage 71,765 179,239 118,368 4,731 1,003 87,467 57,133 33,057 2,008 92,198
LLC
Ocwen Loan Servicing, 293,354 333,007 233,129 14,501 1,082 160,409 39,066 119,517 16,327 174,910
LLC
OneWest Bank * 101,739 44,102 28,775 1,165 44 21,743 2 19,672 3,234 22,908
Select Portfolio 86,776 91,745 52,239 5,257 1,191 30,129 458 30,851 4,077 35,386
Servicing, Inc.
Wells Fargo Bank, N.A. 275,927 305,007 179,733 8,957 771 135,690 55,701 28,135 60,811 144,647
Other Servicers 269,017 440,893 281,714 10,464 1,974 198,592 170,880 16,692 21,484 209,056
Total 2,337,610 2,109,130 1,268,635 59,795 9,814 909,220 447,840 349,327 171,848 969,015
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* OneWest Bank recently sold mortgage servicing rights to Ocwen Loan Servicing, LLC. The transfer is expected to close in stages during the second half of 2013. Therefore, Ocwen Loan
Servicing, LLC includes a portion of the loans previously reported under OneWest Bank.
______
Prepared Statement of Hon. Orrin G. Hatch,
a U.S. Senator From Utah
WASHINGTON--Senate Finance Committee Chairman Orrin Hatch (R-Utah)
today delivered the following opening statement at a hearing to
consider the nomination of Steven Mnuchin to head the U.S. Treasury
Department:
Today we will discuss the nomination of Mr. Steven Mnuchin to serve
as Secretary of Treasury for the incoming Trump administration.
I want to officially welcome Mr. Mnuchin to the Finance Committee.
I appreciate your willingness to appear before us here today and to
serve in this important position.
The position of Treasury Secretary is among the most important in
the executive branch.
The next Treasury Secretary will be tasked with advancing policies
that will improve our Nation's economic and fiscal outlook. The
position oversees both the collection of taxes and the management of
our debt.
In addition, as Congress works to reform our Nation's tax code and
fix our broken health-care system, it is absolutely essential that we
have a cooperative partner overseeing Treasury. That is, quite frankly,
something that has been missing for the past eight years as the Obama
Treasury has become increasingly opaque and non-responsive to inquiries
and communications from members of Congress.
So, as we consider Mr. Mnuchin's nomination, ensuring that both
Congress and the incoming administration are committed to sharing
information and communicating on policy will be among my top
priorities.
And, in that regard, I believe the President-elect has selected a
nominee who will provide a clear channel of communication and be
willing to work with Congress on these all-important efforts.
Another priority for me will be the advancement of pro-growth trade
policies. While USTR is the principal agency for international trade
policy, Treasury plays a key role in several important areas, including
the development of international investment agreements and oversight of
Customs revenue functions.
As the new administration comes in, I want to make sure, first and
foremost, that our trade policies do no harm. Proposals to, for
example, impose unilateral import tariffs as a key tool of
international economic policy need to be carefully evaluated to ensure
they do not hurt us at home.
In addition, I want to make sure that any new trade agreements
establish the highest standards for U.S. stakeholders, consistent with
the Trade Promotion Authority statute enacted in 2015.
Finally, I expect you to engage in much better consultations with
the committee regarding U.S. trade policies then we have had under
President Obama.
I look forward to a productive conversation about these issues
today and in the coming months.
Objectively speaking, I don't believe anyone can reasonably argue
that Mr. Mnuchin is unqualified for the position.
He has three decades of experience working in the financial sector
in a variety of capacities.
He has been a leader and a manager throughout his career,
demonstrating an ability to make tough decisions and to be accountable.
And, he has a reputation for being a problem-solver and an
excellent communicator. Indeed, we have heard from numerous
organizations and associations in a wide variety of industries all
expressing their admiration for Mr. Mnuchin and their support for his
nomination.
Put simply, if the confirmation process focused mainly on the
question of a nominee's qualifications, there would be little, if any,
opposition to Mr. Mnuchin's nomination.
Unfortunately, that's not the world we're living in.
Today, we are in the midst of an unprecedented effort to stall and
prevent confirmation on the Cabinet nominations of an incoming
President. It is disappointing that we've taken this turn in the Senate
where the minority, openly and in so many words, is committed to
obstructing nominees to positions across the board. In many cases,
knowing full well that they cannot prevent outright the confirmation of
nominees, my colleagues are content to unfairly, and in some cases
maliciously, malign more or less every nominee before they can assume
their posts.
With regard to Mr. Mnuchin's nomination, we've seen quite a bit of
consternation over the process and the timing of hearings. We've heard
demands that we convene additional panels of witnesses, a step that has
no precedent in the modern history of this committee. There was even a
``mock hearing'' on this nomination yesterday, held outside of the
committee, focused on issues that are essentially unrelated to the Mr.
Mnuchin's qualifications.
Let me be clear. While my colleagues may believe that nominees in
the incoming administration should be treated differently than those of
any previous administration, on this committee we have followed the
same vetting and hearing process that has been in place for decades,
applying to both Republicans and Democrats alike.
With regard to the substantive arguments being made in opposition
to Mr. Mnuchin, I am hesitant to go into too much detail before giving
the nominee a chance to refute any accusations that have been made.
That said, I do want to note a few simple facts.
First, no one has credibly alleged that any laws, regulations, or
industry standards were violated by companies run by Mr. Mnuchin. On
the contrary, speaking of the main set of allegations regarding the
foreclosure practices of OneWest Bank, all independent evaluations of
the company's actions have resulted in high marks. This includes
reviews by the FDIC Inspector General and the Department of Treasury.
Second, any claims that Mr. Mnuchin's businesses contributed to the
housing and foreclosure crisis that precipitated the financial collapse
of 2008 are similarly lacking in merit. Mr. Mnuchin had no involvement
in the mortgage market in the years leading up to the collapse. In
fact, it is my understanding that, after purchasing IndyMac and all of
its toxic mortgage assets, Mr. Mnuchin's company offered loan
modifications to the vast majority of its delinquent borrowers and was
one of the very first institutions to make offers to forgive portions
of loan principal balances in order to reduce foreclosures.
To that point, Mr. Mnuchin is joined by a guest today: Ms. Faith
Bautista, President and CEO of the National Asian American Coalition
and head of the National Diversity Coalition. In those capacities, she
worked with many homeowners to work out loan modifications with OneWest
Bank. She is here today to support Mr. Mnuchin's nomination.
Finally, I'll just note that those making claims that Mr. Mnuchin's
connection to the mortgage and banking industry is, on its own,
disqualifying are conveniently forgetting that the current Treasury
Secretary's tenure at a major Wall Street bank included overseeing
business units that were sanctioned by the SEC and others for practices
that harmed innocent investors. Yet, when his nomination came before
the Senate, this connection to Wall Street and the financial crisis was
deemed forgivable.
Like I said, I'll let Mr. Mnuchin defend himself from the specious
lines of attack, which, given the lack of credibility in the
accusations, shouldn't be too difficult for a man of his talents.
For now, I simply hope that we can have a fair and open discussion
during the course of what will likely be a long hearing. And, I hope
that, going forward, my colleagues will apply the same standards, both
in terms of process and policy substance, that have applied to nominees
in previous administrations.
Once again, I want to thank Mr. Mnuchin for being here today. I
look forward to hearing his testimony.
______
Letters Submitted by Hon. Orrin G. Hatch
National Diversity Coalition
15 Southgate Avenue, Suite 200
Daly City, CA 94015
Phone: (650) 952-0522
Fax: (650) 952-0530
January 2, 2017
National Diversity Coalition Supports Steven Mnuchin for
U.S. Secretary of the Treasury
Dear Chairman Hatch and Senator Wyden,
Many members of the National Diversity Coalition have worked with Mr.
Mnuchin and OneWest/CIT over the past 5 years. Based upon his
commitments to building a strong economy, including greater
homeownership, more effective small business development, and youth
financial literacy, we support Mr. Mnuchin's nomination as Secretary of
the Treasury.
The National Diversity Coalition includes the leadership of our
nation's 5,000 African Methodist Episcopal churches and 40,000 Latino
evangelical churches, as well as leadership from major minority
business chambers of commerce, such as the Los Angeles Latino Chamber
of Commerce, and a broad range of minority nonprofits such as the
National Asian American Coalition.
It is the expectation of the National Diversity Coalition that as
Secretary of the Treasury Mr. Mnuchin will:
work on efforts to expand homeownership from the present 50-year
low of 62% to at least 70% of Americans;
expand small business opportunities and assistance to move
America from 29 million small business owners to 40 million small
business owners; and
reduce unemployment among those without college degrees to a
level consistent with the overall 4.6% unemployment rate in the U.S.
As a first step, we hope and expect that Mr. Mnuchin will form a U.S.
Treasury Consumer Advisory Board and will regularly meet with community
members, including those who represent our nation's 130 million
minorities and the 70% of Americans who live from paycheck to paycheck.
We also support the letter with more than 1,000 homeowner and small
business owner signatories sent by the National Asian American
Coalition on behalf of Mr. Mnuchin's confirmation as Secretary of the
Treasury. Many of the leaders of the organizations signing this letter
are prepared to testify at Senate hearings on Mr. Mnuchin's
confirmation.
Most respectfully,
Faith Bautista
President and CEO, National Asian American Coalition
CEO, National Diversity Coalition
Mark Whitlock
Senior Minister, COR AME Church, Irvine, CA
Director of Corporate Partnerships, 5,000 African Methodist Episcopal
Churches
Executive Director, Ecumenical Center for Black Church Studies
Chair, Orange County Interdenominational Alliance
Chair, National Diversity Coalition
Executive Director of the Cecil Murray Center for Community Engagement
at USC
Jack Miranda
Vice Chair, Orange County Interdenominational Ecumenical Council
Secretary, National Diversity Coalition
Gilbert Vasquez
Chair, Los Angeles Latino Chamber of Commerce Serving 330,000 Latino
Businesses
Treasurer, National Diversity Coalition
Regeanie Corona
CEO, Advancing the Seed
Cora Oriel
President, Asian Journal Publications
Jin Sung
Executive Director, OASIS Center International
Everett Bell
Founder and Executive Director, Impact Southern California Community
Development Corporation
______
December 29, 2016
The Honorable Orrin Hatch
Chairman
Committee on Finance
U.S. Senate
Washington, DC 20510
The Honorable Ron Wyden
Ranking Member
Committee on Finance
U.S. Senate
Washington, DC 20510
Appointment of Steven Mnuchin for U.S. Treasury Secretary
Dear Sirs,
I am writing to show my support for the nomination of Steven
Mnuchin to serve as the United States Secretary of the Treasury in the
incoming Donald Trump administration.
As a minority-owned small business, our greatest concern pertains
to the economic and job opportunities within our community and beyond.
With the experience that Mr. Mnuchin has gained during his career in
the finance and banking sectors, I believe he is readily equipped to
serve our country and tackle the concerns of our constituents head on.
His prior leadership positions have sculpted him into an ideal
candidate to help the Treasury Department achieve the nation's
financial objectives. Without a doubt, I know that Mr. Mnuchin will
serve our country effectively and efficiently as the United States'
next Secretary of the Treasury.
With utmost respect,
Royal Placement Services
Sylmar, CA
______
December 25, 2016
The Honorable Orrin Hatch
Chairman
Committee on Finance
U.S. Senate
Washington, DC 20510
The Honorable Ron Wyden
Ranking Member
Committee on Finance
U.S. Senate
Washington, DC 20510
Appointment of Steven Mnuchin for U.S. Treasury Secretary
Dear Sirs,
We are writing to show our support for the nomination of Steven Mnuchin
to serve as the United States Secretary of the Treasury in the incoming
Donald Trump administration.
We believe Mr. Mnuchin's appointment and service will greatly benefit
our country, based on his much-admired performance in various executive
and leadership positions in the finance and banking sectors. His vast
experience in these areas makes him an ideal candidate to help the
Treasury Department achieve its main objectives, including:
Maintaining a strong economy;
Creating economic and job opportunities by promoting the conditions
that enable economic growth and stability at home and abroad;
Strengthening national security by combating threats and protecting
the integrity of the financial system; and
Managing the U.S. Government's finances and resources effectively.
Respectfully yours.
This letter was signed by 728 individuals and organizations.
______
January 2, 2017
The Honorable Orrin Hatch
Chairman
Committee on Finance
U.S. Senate
Washington, DC 20510
The Honorable Ron Wyden
Ranking Member
Committee on Finance
U.S. Senate
Washington, DC 20510
Strong Minority Small Business Support for our Next Secretary of the
Treasury
Dear Chairman Hatch and Senator Wyden,
America has 29 million small business owners. Small business owners are
responsible for more than half of all new jobs in America. Today, as a
result of too many regulatory agencies and a lack of a deep commitment
to small business development, most small business owners and/or
potential small business owners are unable to expand or start new
businesses.
In too many cases, cabinet and regulatory agency leadership feud among
themselves as to how regulators should encourage small business. We
favor a Secretary of the Treasury such as Steven Mnuchin who has the
experience and the commitment to bring agencies together to promote
America's strongest domestic asset: small businesses and small business
owners.
We are prepared to testify on behalf of Steven Mnuchin as our new
Secretary of the Treasury, particularly if the hearing is held in
Southern California. That is, the U.S. Senate should come to the small
business owners for advice and input rather than small business owners
being forced to testify in DC, the home of tens of thousands of self-
interested lobbyists.
Most respectfully,
Willie Chu, Nautilus Seafood
Wayne Berman, Nautilus Seafood
Rodel Fuentes, Distinctive Contractors
______
Team Freedom International Inc.
17127 Pioneer Blvd., Suite K
Artesia, CA 90701
P: 844-270-3563
https://www.teamfreedominternationalinc.com/
December 27, 2016
The Honorable Orrin Hatch
Chairman
Committee on Finance
U.S. Senate
Washington, DC 20510
The Honorable Ron Wyden
Ranking Member
Committee on Finance
U.S. Senate
Washington, DC 20510
Appointment of Steven Mnuchin for U.S. Treasury Secretary:
To Whom It May Concern,
I, Joel Esteves, CEO of Team Freedom International, Inc. hereby give my
full support to the installation of the new U.S. Secretary of the
Treasury--Mr. Steven Mnuchin.
With his background in Real Estate, Investment and the banking system,
I truly believe that he is the right person for the position that Mr.
Trump appointed him for.
He has displayed true leadership in the past and must be very confident
in surpassing people's expectations for his new role as the new U.S.
Secretary of the Treasury.
More power to Mr. Steven Mnuchin.
Very truly yours
Joel Esteves
______
VantageScore
1055 Washington Blvd., 3rd Floor
Stamford, CT 06901
https://www.vantagescore.com/
T: 203-363-2160
F: 203-569-0010
December 28, 2016
The Honorable Orrin Hatch The Honorable Ron Wyden
Chairman Ranking Member
Committee on Finance Committee on Finance
U.S. Senate U.S. Senate
Washington, DC 20150 Washington, DC 20150
Dear Chairman Hatch and Ranking Member Wyden:
I am writing today to lend my voice in support of President-elect
Trump's nomination of Steven Mnuchin to serve as Secretary of the
Treasury. If confirmed, Mr. Mnuchin would bring with him to the office
of Secretary of the Treasury a wealth of diverse experience. While I do
not know Mr. Mnuchin personally, others who do know him and whose
judgment I trust have assured me of their confidence in his character,
temperament, and abilities.
Last November 30th, the day it was announced that Mr. Mnuchin was
President-elect Trump's choice to serve as Secretary of the Treasury,
Mr. Mnuchin participated in a wide-ranging interview on CNBC's Squawk
Box. Two of the points he made during that interview struck me as
particularly relevant to his nomination to serve as Secretary of the
Treasury because of the underlying tone of inclusiveness. Specifically,
he not only noted that the Trump administration's ``most important
priority is to sustained economic growth'' but he also stated very
clearly that ``our job is to make sure that the average American has
wage increases and good jobs.''
I strongly encourage you to schedule a confirmation hearing on Mr.
Mnuchin's nomination at the earliest possible opportunity.
I trust that you find this input useful as you move forward with the
nomination process. If you or other Members of the Committee have any
questions or if I can be of further assistance in any way, please don't
hesitate to contact me.
Sincerely,
Barrett Burns
President and CEO
[email protected]
______
Mortgage Bankers Association (MBA)
1919 M Street NW, 5th Floor
Washington, DC 20036
https://www.mba.org/
(202) 557-2700
January 17, 2017
The Honorable Orrin Hatch
Chairman
Committee on Finance
U.S. Senate
219 Dirksen Senate Office Building
Washington, DC 20510
The Honorable Ron Wyden
Ranking Member
Committee on Finance
U.S. Senate
219 Dirksen Senate Office Building
Washington, DC 20510
Dear Chairman Hatch and Ranking Member Wyden,
On behalf of the Mortgage Bankers Association (MBA), I am writing you
regarding the nomination of Steven T. Mnuchin to serve as the next
Secretary of the Treasury. I urge the Senate Finance Committee to
approve his nomination as quickly as possible.
MBA believes the Treasury Department needs to address several critical
issues that will have a positive impact on our nation's real estate
finance market. First, more than eight years since the federal
government took control of Fannie Mae and Freddie Mac, it is critical
that the next administration work with Congress and key stakeholders to
enact legislative reforms to our secondary markets and provide long-
term certainty to the housing finance system. The next Treasury
Secretary will play an integral role in these efforts. Second, there is
bipartisan agreement that our nation's economy would be strengthened
through the enactment of growth-promoting comprehensive tax reform. MBA
and its members stand ready to work with all stakeholders regarding
this process. We are committed to supporting tax reform legislation
that will provide appropriate incentives for homeownership and promote
growth in our country's residential, rental and commercial real estate
markets. Finally, we urge the next Treasury Secretary to reevaluate
international capital regimes to ensure they do not place U.S.
financial institutions at a competitive disadvantage.
MBA believes Mr. Mnuchin's experience uniquely prepares him to
understand and respond to the complex challenges that will face the
next Treasury Secretary. We believe he will put his extensive talents
to use in ways that will seek to strengthen America's housing markets
and provide regulatory certainty for the real estate finance industry.
I would again respectfully urge the Finance Committee and, in turn, the
full Senate, to approve Mr. Mnuchin's nomination. MBA looks forward to
working with him in his new role. Thank you in advance for your
consideration of these views.
Sincerely,
David H. Stevens, CMB
President and Chief Executive Officer
______
National Asian American Coalition (NAAC)
15 Southgate Avenue, Suite 200
Daly City, CA 94015
Office (650) 952-0522
Fax (650) 952-0530
http://www.naac.org/
January 3, 2017
Why Asian American Community Supports Trump Nominee
for Secretary of the Treasury
Dear Chairman Hatch and Senator Wyden,
The National Asian American Coalition is one of the largest pan Asian
American coalitions in America. We represent Asian Americans who wish
to be homeowners and entrepreneurs, and we are strong proponents of
effective youth financial literacy, particularly as it effects the many
underserved Asian American communities throughout the U.S.
Although we and many other communities opposed many of the IndyMac
policies and practices, including reverse mortgages and foreclosures,
we recognized the crisis in 2008. We therefore reluctantly accepted the
decision of the FDIC to sell IndyMac to the only investors interested
in making a bid. In large measure our support is attributable to our
high respect for, and confidence in, then-FDIC chair Sheila Bair. Even
from the perspective of hindsight, we are unclear that there was any
other choice at the time for the FDIC and Sheila Bair. We personally
witnessed Mr. Mnuchin's actions to protect homeowners during this time
by offering them loan modifications.
This letter of support for Secretary of the Treasury Nominee Steven
Mnuchin is based in significant part on our coalition's recent meetings
with Mr. Mnuchin and our continued relationship with CIT and its CEO.
It is our belief that the past practices of IndyMac that are presently
being questioned are not a predictor of Steven Mnuchin's leadership
qualities as Secretary of the Treasury.
Based upon our meetings with many former Secretaries of the Treasury,
including Summers, O'Neill, Geithner, and Lew, it is our belief that
the new Secretary of the Treasury, Mr. Mnuchin is highly likely to
carefully examine Treasury policies in the context of their impact on
the 70% of Americans who live from paycheck to paycheck and our
nation's 130 million minorities, including 20 million Asian Americans.
As a result of the actions of Mr. Mnuchin described above, and his
commitment to further work on behalf of communities of color, the
National Asian American Coalition was able to gather more than 1,000
individual signatures in support of his nomination.
Most importantly, we envision a Treasury Department that is as friendly
to the 70% of Americans who live from paycheck to paycheck as it is to
the highest-paid lobbyists, many of whom are among the one-tenth of 1%
of Americans.
We are fully prepared and open to an invitation to testify on behalf of
Mr. Mnuchin's confirmation as our next Secretary of the Treasury.
Most respectfully,
Faith Bautista
President and CEO
National Asian American Coalition
______
National Asian American Coalition
15 Southgate Ave., Suite 200
Daly City, CA 94015
January 16, 2017
The Honorable Orrin Hatch
Chairman
Committee on Finance
U.S. Senate
Washington, DC 20150
The Honorable Ron Wyden
Ranking Member
Committee on Finance
U.S. Senate
Washington, DC 20150
The National Asian American Coalition supports the nomination of Mr.
Steven Mnuchin to become the Secretary of Treasury. Attached are
letters from our home owners and colleagues that had IndyMac/OneWest
home loans and had been modified during the financial crisis. Our
organization is a HUD Approved housing counseling agency that helps a
lot of homeowners keep their homes. IndyMac/OneWest Bank was one of the
banks that we worked with and had successfully modified home loans.
If you have any further questions, please contact our head office in
Daly City, California at 650-952-0522.
Thank you.
______
January 15, 2017
To whom it may concern,
My family's residential home was with IndyMac bank. My father, Rene
Valbuena, was the borrower. My father was diagnosed with cancer in 2009
and we could not afford to pay for our mortgage payment since he was
one of the main income providers. We submitted our loan modification
request and submitted what was needed for the process. The
communication was good and we were not passed around from one
representative to another. After 2 months, we got our approval for our
trial modification. We continued to pay the new modified monthly
payment and it became permanent after the 3 months trial period. We
were very grateful that our loan got modified. We chose to sell the
property later on when my dad's cancer came back.
my dad's letter to indymac
(sent during the time of modification)
Thank you for approving me for the trial modification. Attached are the
documents you required to update my loan modification files. The only
thing lacking in my submission is the 2008 income tax return. I am
trying to reconstruct my documents and I still intend to file my
returns soon as I put together my paperwork. A lot were misplaced
because I was seriously ill. I was able to file the 2009 since I now
feel much better and could focus. Last year I was not able to file the
2008 because I was concentrating on staying alive. As I stated in my
hardship letter, I was diagnosed with cancer last year. I had to stop
working and was unable to keep track of papers I need to file. I had
chemotherapy, radiation, and prophylactic cranial irradiation. I was
hospitalized 3 times and it is just this year that I am still
recovering from side effects. With God's help I am now in remission and
starting to do part time work.
Leica Valbuena
______
January 16, 2017
I am a previous homeowner in Walnut Creek, CA. My loan was with IndyMac
Bank with high interest and approximately $4,632.00 and a second
mortgage with a payment of $1,400.00 per month. I fell behind payments
and my loan became in default after my spouse was diagnosed with
cancer. My financial stability was greatly affected after all my credit
cards were exhausted thus causing me to file chapter 13 bankruptcy.
OneWest Bank offered a loan modification with a lower monthly payment
including interest rate. I decided to walk away because I am still
unable to afford the payment due to reduction in income. They were very
accommodating and even offered a moving allowance of $5,000. I am
thankful for everything they have done for me and my family.
Nora Penaflor
______
January 16, 2017
Our names are Elpidio Delos Reyes and Nida Delos Reyes, located in
Richmond, CA 94806. Our family asked for a loan modification from
OneWest Bank on November 2011 through the help of the National Asian
American Coalition. We were pleased with the process of how our
paperwork was handled. We were never given any problem by OneWest Bank.
They assigned only one single point of contact which makes it a lot
easier and the process went smoothly.
Because of OneWest Bank's help and NAAC, we recommend Steven Mnuchin to
be the Secretary of the Treasury. We were told that he was leading the
bank when we got modified.
We thank Mr. Mnuchin and OneWest Bank.
Sincerely,
Nida Delos Reyes
Elpidia Delos Reyes
______
January 14, 2017
My name is Mailene Pacifico. I am located in San Leandro, CA. I have an
equity line of credit with OneWest Bank of $53,176.00. We did a short
sale of our home in June 2009. We thought our line of credit was also
taken care off. Our credit still shows outstanding and we are having a
hard time getting approval for any type of financing.
We went to National Asian American Coalition to ask for help. NAAC
wrote a letter to OneWest Bank to ask for help so we can buy a home
again. We are very pleased of the immediate action that OneWest Bank
took for us. They did the necessary action so it will not show on our
credit.
Because of OneWest Bank's leadership, we truly thank Mr. Mnuchin and
OneWest Bank.
Sincerely,
Maileen Pacifico
______
December 27, 2016
The Honorable Orrin Hatch
Chairman
Committee on Finance
U.S. Senate
Washington, DC 20510
The Honorable Ron Wyden
Ranking Member
Committee on Finance
U.S. Senate
Washington, DC 20510
Families for a Better America Supports Steven Mnuchin
for U.S. Treasury Secretary
Dear Sirs,
We respectfully urge you to help ensure that Steven Mnuchin becomes the
next Secretary of the Treasury.
As the public record clearly shows, Mr. Mnuchin has the required
training and leadership experience--particularly in the finance and
banking sectors--that make him the ideal candidate to lead the U.S.
Treasury Department in achieving its critical goals for the country.
These include:
The maintenance of a strong economy;
The creation of jobs for those who have lost theirs and for
those who are just entering the job sector;
The protection of our financial system; and
The effective management of our country's financial and other
resources.
Respectfully yours,
Families for a Better America
This letter was signed by 266 individuals and organizations.
______
January 3, 2017
The Honorable Orrin Hatch
Chairman
Committee on Finance
U.S. Senate
Washington, DC 20510
The Honorable Ron Wyden
Ranking Member
Committee on Finance
U.S. Senate
Washington, DC 20510
Business Owners in Support of Steven Mnuchin for U.S. Treasury
Secretary
Dear Sirs,
We respectfully urge you to help ensure that Steven Mnuchin becomes the
next Secretary of the Treasury.
As the public record clearly shows, Mr. Mnuchin has the required
training and leadership experience--particularly in the finance and
banking sectors--that make him the ideal candidate to lead the U.S.
Treasury Department in achieving its critical goals for the country.
These include:
The maintenance of a strong economy;
The creation of jobs for those who have lost theirs and for
those who are just entering the job sector;
The protection of our financial system; and
The effective management of our country's financial and other
resources.
Respectfully yours,
Robert Aguilar
Rolando Esteban
Small business owners
______
American Bankers Association
1120 Connecticut Avenue, NW
Washington, DC 20036
1-800-BANKERS
https://www.aba.com/
January 12, 2017
The Honorable Orrin G. Hatch
Chairman
Committee on Finance
U.S. Senate
SD-219 Dirksen Senate Office Building
Washington, DC 20510
The Honorable Ron Wyden
Ranking Member
Committee on Finance
U.S. Senate
SD-219 Dirksen Senate Office Building
Washington, DC 20510
Dear Chairman Hatch and Ranking Member Wyden:
The American Bankers Association supports the confirmation of Steven T.
Mnuchin as Secretary of the Treasury. ABA represents banks of all
sizes, charters, and business models across the country. This
diversity--which includes community, mutual, and trust banks as well as
mid-size, regional, and globally active institutions--is critical to
supporting America's complex, $19-trillion economy, and the people,
businesses, and communities that make up that economy.
Among the many responsibilities of the Treasury Secretary, foremost is
the Secretary's responsibility to encourage and promote the economic
strength of the United States, and to advise the President to that end.
The economic growth and strength of the United States is also what lies
at the core of the business of banking. Our industry grows only as do
the economy and finances of the nation, and as the people, communities,
and businesses of the nation grow and prosper. We look forward to
working with Mr. Mnuchin should he be confirmed by the Senate, on
policies that will reinforce financial recovery and economic progress.
His public statements as well as his career in finance bring us
optimism with regard to the outlook for public policies focused on
growth and prosperity.
Shortly following the November election, we sent a letter to President-
elect Trump outlining some of the key policies that we believe would
make an important contribution to a thriving economy. We particularly
focused on smart regulation, bank supervision that is tailored and
balanced to fit more efficiently and effectively the variety of
business models presented by the thousands of banks in the U.S., and in
the ways that they meet the various needs of their customers. The
Treasury Secretary has an important role in encouraging financial
regulators to coordinate their work, particularly in keeping with the
needs for strong, prudential development of the economy.
ABA also believes that efforts in the coming months should incorporate
attention to small business growth, the burdens of student debt, a
thriving housing market that includes mortgage availability and
appropriate housing finance reform. High on the priority list would
also be reforming flood insurance, innovation that embraces
technologies that improve the quality and accessibility of financial
services, reinforcing cyber security and combating data breaches and
financial fraud, and promoting the role of the market place in pricing
payments systems and other financial services.
We look forward to working with the Treasury Secretary on these
important issues and support the Committee's work to move forward with
the nomination of Secretary-nominee Steven T. Mnuchin.
Sincerely,
Dorothy A. Savarese Rob Nichols
Chairman President and CEO
American Bankers Association American Bankers Association
Chairman, President, and CEO
Cape Cod Five Cents Savings Bank
Orleans, MA
______
Ambassador Ronald Weiser
January 16, 2017
The Honorable Orrin Hatch The Honorable Ron Wyden
Chairman Ranking Member
Committee on Finance Committee on Finance
U.S. Senate U.S. Senate
Washington, DC 20510 Washington, DC 20510
Dear Chairman Hatch and Ranking Member Wyden:
I am writing today to express my strong support of President-elect
Trump's nomination of Steven Mnuchin to serve as the next Secretary of
the Treasury. If confirmed, Mr. Mnuchin would bring a wealth of
knowledge and experience to the office. He has spent the last 30 years
working in global trading markets, technology, operations, housing
finance, regional banking and has a deep understanding of the financial
markets that make him uniquely qualified to serve as the Treasury
Secretary.
I have gotten to know Steven in his role as National Finance Chairman
for Trump Victory. Having served with him as one of the six vice chairs
of Trump Victory, I have had the opportunity to view his approach to a
variety of tasks and to understand why he was chosen for this role. His
years of work experience coupled with his ability to juggle a large
number of balls in the air while keeping the finish line in clear sight
makes him an ideal candidate. I also believe his banking experience and
understanding of smaller local and regional banks could be helpful as
we try to preserve these types of institutions for future generations.
I firmly believe that Steven is meant to hold this post, and strongly
encourage members of the committee to proceed with his confirmation. If
I can be of further assistance in any way please don't hesitate to
contact me.
Sincerely,
Ambassador Ronald Weiser (ret.)
______
Vintage Capital Group, LLC
11611 San Vicente Boulevard, 10th Floor
Los Angeles, CA 90049
310-979-9090
310-207-0035 fax
_______________________________________________________________________
From Carla H. Sands, Chairman
January 10, 2017
The Honorable Orrin Hatch The Honorable Ron Wyden
Chairman Ranking Member
Committee on Finance Committee on Finance
U.S. Senate U.S. Senate
Washington, DC 20510 Washington, DC 20510
Dear Chairman Hatch and Ranking Member Wyden:
I am reaching out to you today to voice my strong support for
President-elect Trump's Secretary of the Treasury Nominee, Steven
Mnuchin. Steven possesses deep levels of financial knowledge and has
demonstrated, time and time again, excellent and measured decision-
making abilities. His knowledge of the global economic system is
sufficiently well-rounded, and I believe he is fully qualified to serve
as this nation's next Treasury Secretary.
I have known Steven for over 7 years, both personally and
professionally. He is a man of outstanding character and integrity.
Steven has proven himself to be an exceptional and philanthropic member
of the community with a superb reputation.
The economic engine of America has been stalled for the last 8 years,
due to high tax rates and onerous regulations. Steven Mnuchin and the
Trump Economic Advisory team are proposing new and lower tax rates to
get the economy moving again. Steven, as Secretary of the Treasury and
working hand-in-hand with Congress, will spark America's long-awaited
economic revival as business and individual tax rates are lowered and
the entrepreneurial spirits of America unleashed.
It is my hope that members of the committee proceed with Steven's
confirmation process on an expedited basis. Our country needs him.
Please let me know if I can be of further assistance to your committee.
Sincerely,
Carla Sands
______
Stone Point Capital
Stone Point Capital LLC
20 Horseneck Lane
Greenwich, CT 06830
203-862-2970 Fax 203-862-2971
[email protected]
January 12, 2017
The Honorable Orrin Hatch The Honorable Ron Wyden
Chairman Ranking Member
Committee on Finance Committee on Finance
U.S. Senate U.S. Senate
Washington, DC 20510 Washington, DC 20510
Dear Chairman Hatch and Ranking Member Wyden:
It is my privilege to provide this letter of support without
reservation for the nomination of Steven Mnuchin to serve as the
Secretary of the Treasury.
I have known Mr. Mnuchin for approximately 30 years and am confident
that he has the intelligence, experience, dedication, and temperament
to be successful if confirmed as Secretary of the Treasury. He has a
broad and deep base of knowledge that spans global markets, housing
finance, technology, and banking, among other areas, and is one of the
most effective and hard-working executives that I have met during my
40-year career in the financial services industry. I firmly believe
that Mr. Mnuchin is uniquely positioned to serve as both a thoughtful
economic advisor to President-elect Trump and a strong leader of the
growth, reform, and other initiatives to be pursued by the new
administration.
I am CEO of Stone Point Capital, a private equity firm that invests
exclusively in the financial services industry. Our clients include
state investment funds, pension funds, endowments, and other leading
institutions. During the height of the financial crisis in 2008, our
firm entrusted Mr. Mnuchin with fiduciary funds for the opportunity
that he created to bring capital into the U.S. banking system at a time
of significant need. With this investment, I was able to witness
firsthand how Mr. Mnuchin worked tirelessly and effectively to ensure
that funding was available to allow IndyMac to transition out of FDIC
conservatorship when most institutional investors were unwilling to
provide any capital to our banking system.
IndyMac was a seriously challenged institution that had many
organizational and other problems. Options for resolving IndyMac were
extremely limited, and possibly non-existent, at the end of 2008. The
actions of Mr. Mnuchin produced an option for the FDIC that saved the
public from further losses and preserved thousands of jobs in
California and Texas. Moreover the precedent established by the OneWest
deal, the first resolution following the crisis, provided the FDIC with
an effective model to resolve many other impaired financial
institutions, saving U.S. taxpayers from many billions of dollars of
losses.
It is important to note that Mr. Mnuchin has been the subject of unfair
press reports related to his service at OneWest Bank. During the 6
years of his leadership, I was able to observe how devoted Mr. Mnuchin
was to ensuring that OneWest had the necessary policies, procedures,
resources and staff to work through the many problems inherited with
the acquisition of IndyMac's failed operations. According to the FDIC
Office of the Inspector General, OneWest properly solicited and
processed mortgage loan modifications more than 98% of the time, an
outstanding record relative to its peers. Moreover, the review of
crisis-era foreclosures by OneWest revealed no errors in many of the
subject areas and error rates below one percent in most other review
categories. I attribute this high level of accomplishment in an
extremely challenging environment to unrelenting standards of
excellence set by Mr. Mnuchin for the management team at OneWest.
Mr. Mnuchin is an outstanding candidate for Secretary of the Treasury,
and I hope that members of the committee will proceed with his
confirmation on an expedited basis.
Please do hesitate to contact me if I can be of any assistance as you
complete your consideration of Mr. Mnuchin's nomination.
Sincerely,
Charles A. Davis,
CEO, Stone Point Capital LLC
______
Duke Buchan III
January 11, 2017
The Honorable Orrin Hatch The Honorable Ron Wyden
Chairman Ranking Member
Committee on Finance Committee on Finance
U.S. Senate U.S. Senate
Washington, DC 20510 Washington, DC 20510
Dear Chairman Hatch and Ranking Member Wyden:
I hope this letter finds both of you and the members of the Committee
on Finance well.
Today, I write to the Committee with unwavering support of the nominee
to serve as our next Secretary of the Treasury, Mr. Steven Mnuchin.
Over a thirty-year business career with global and domestic financial
institutions, Steven has consistently proven his innate ability to lead
irrespective of the economic environment. Steven's steady hand
throughout the entire IndyMac and OneWest episode resulted in tens of
thousands of families finding solutions to their homeownership issues.
I had the pleasure of serving with Steven on President-elect Trump's
Finance Team over the course of the campaign. Steven is intelligent, a
problem solver, a solution-oriented leader, and an excellent
communicator. I have spent many hours conversing with him about how to
better serve our country. His ideas are insightful and practical.
Steven will be a patriotic and dedicated public servant.
We need a Secretary of the Treasury who is focused and committed to
elevating the United States to a higher level, both at home and on a
global scale. Because of his background, Steven possesses the
significant experience that is necessary to aid in the implementation
of President-elect Trump's tax reform plans, as well as in modifying
regulations that place unnecessary burdens on our country's businesses
and workforce.
I fully endorse Steven for this critical position, and I believe that
he will leave our country in a better place than he found it.
Feel free to reach out to me with any follow up questions that you may
have.
Sincerely,
Duke Buchan III
______
Faith Schwartz
January 13, 2017
The Honorable Orrin Hatch The Honorable Ron Wyden
Chairman Ranking Member
Committee on Finance Committee on Finance
U.S. Senate U.S. Senate
Washington, DC 20510 Washington, DC 20510
Re: Nomination of Steven Mnuchin for Secretary of the Treasury
Dear Chairman Hatch and Ranking Member Wyden:
I write in connection with the nomination of Steven Mnuchin to be
Secretary of the Treasury. I do not know Mr. Mnuchin, but as the former
executive director of the HOPE NOW Alliance, I am intimately familiar
with the loan modification and home retention programs of OneWest Bank,
which have played such a prominent role in the media coverage of Mr.
Mnuchin's nomination. I therefore wanted to make sure that the
Committee has accurate facts as it considers this important nomination.
HOPE NOW is a voluntary alliance between counselors, mortgage
companies, investors, regulators, and other mortgage market
participants created in 2007 with the strong encouragement of the
Department of the Treasury and the Department of Housing and Urban
Development. HOPE NOW brought together diverse stakeholders to
collaborate to address challenges in mortgage servicing and to assist
at-risk homeowners. Since 2007, HOPE NOW has played an important role
in facilitating more than six million loan modifications and other
foreclosure avoidance solutions for homeowners. I was proud to lead the
organization from its inception during the financial crisis through
early 2013.
Although the government encouraged the creation of HOPE NOW, membership
is purely voluntary and not all banks and mortgage companies joined the
alliance. Under Mr. Mnuchin's leadership, however, OneWest Bank joined
early and took an active and leading role in rolling out homeowner
assistance programs to its borrowers. In fact, OneWest was an early
adopter of numerous voluntary loan modification programs, reflecting
both the company's cultural commitment to home retention and Mr.
Mnuchin's personal commitment to the FDIC to vigorously pursue
foreclosure avoidance options wherever possible. For example, OneWest
was one of the first banks to adopt the Principal Reduction
Alternative, an optional part of the federal HAMP program under which
participating servicers reduced borrower principal (non-participating
institutions only reduced borrower interest rates, which was found to
be a less sustainable model for borrowers who loan balances exceeded
their property value). OneWest also was an early adopter of the 2MP
program, which allowed servicers to modify qualifying second mortgages.
OneWest was not required to offer any of these benefits to borrowers,
and not all servicers adopted these programs. But OneWest's loan
retention staff, as well as leadership, were committed to avoiding
foreclosures where possible and were tremendous industry partners. To
me, OneWest's consistent adoption of new home retention innovations
spoke volumes about the company's commitment in this important area.
Home retention options for the industry were varied and lacked a
strong, consistent structure until HOPE NOW members and investors began
coordination on a national loan modification structure. These industry
efforts were enhanced when the Government HAMP modification program was
introduced to servicers and loan investors in 2009. As a reminder, a
loan modification means there is a reduction in rate, or change in
term, or reduction in principal balance of a loan. Introducing these at
scale was challenging to the mortgage industry and the investor
community. Yet both the volume and the quality of home retention
options OneWest provided to its customers were highly regarded, both by
me and my HOPE NOW colleagues and by the federal government offices
overseeing servicer performance. Treasury Department reports on loan
modifications show that OneWest offered more than 101,000 loan
modifications to struggling homeowners. And when OneWest offered loan
modifications, its offers included principal forgiveness as much as
five times more often industry averages. Its loan modifications also
stood out for sustainability: The rate at which its trial modifications
were converted to permanent modifications was 91 percent, the highest
rate in the industry.
I should note that OneWest's work to help borrowers through the
financial crisis was not limited to modifications but also focused on
refinance solutions. OneWest was a major supporter of the Obama
Administration's HARP refinancing program, which encouraged banks to
refinance high-rate mortgages on properties with little or no equity
into more sustainable, lower rate loans. It is my view that this is one
of the most important refinance programs that has been offered in the
country, preventing subsequent foreclosures and modifications. The
GSEs, the Federal Housing Finance Agency, and lender partners saved
homeowners from default by supporting this innovative refinance
program. In 2013, the last year before OneWest sold its mortgage
business, the company originated more than $400 million in HARP
refinance loans, including more than $70 million to minority borrowers.
This last point is particularly relevant, since some media reports have
suggested that the company failed to lend in minority communities based
on data for the time period after OneWest exited the mortgage business.
I was very proud to lead HOPE NOW through this very dark economic time.
The industry and homeowners struggled with record level defaults and
the systems and processes were initially not adequate to accommodate
the widespread national problems in the housing market. In order to
make progress, the approaches to minimizing foreclosure needed
reengineering, partnering, and strong communications, to make sure all
options were reviewed to help troubled homeowners avoid foreclosures,
and OneWest was an important partner and supporter in this effort.
Despite all efforts to mitigate foreclosures, OneWest, like all
servicers, did foreclose on some borrowers. It is important to review
the full picture of activity to understand the scope of the situation
and the progress and failures through this time period. OneWest had far
fewer foreclosures than solutions it offered to homeowners. The
regrettable fact of the financial crisis is that, for a variety of
reasons, some borrowers lacked the financial ability to make payments
on their loan obligations on any reasonable terms. For these borrowers,
the question is whether OneWest exhausted all home retention options
before foreclosing, and it made material errors in the foreclosure
process. The best evidence on this question comes from the government's
report of the results of the Independent Foreclosure Review, which
required the 14 largest mortgage banks to review all their post-crisis
foreclosure for compliance errors. This report showed that OneWest made
mistakes in the loan modification process less than one-half of one
percent of the time. Per the report, it foreclosed on borrowers who
were not liable for foreclosure only .001 percent of the time, and in
that minuscule number of cases, it paid full restitution to the
affected borrowers. Most every institution I worked with through the
crisis put their heart and soul into helping homeowners. That often
gets lost in the discussions. While even one avoidable foreclosure is
too many, my experience working with financial institutions is that
OneWest's compliance rate put it at or near the very top performance of
servicers.
Let me reiterate that I do not know Steven Mnuchin personally but I
dealt with his management team from the top ranks through the day-to-
day staff that worked directly with at-risk borrowers. They were very
active with HOPE NOW and supportive of the many efforts underway to
help borrowers in default. I have no political agenda in promoting his
confirmation. But as the former head of the national organization
dedicated to finding home retention solutions for struggling homeowners
affected by the financial crisis, I believe the record should be clear
about the actual record of OneWest in delivering solutions to many
thousands of its customers during my tenure at HOPE NOW.
Very truly yours,
Faith Schwartz
Former Executive Director
HOPE NOW
______
Flagstar Bank
5151 Corporate Drive
Troy, Michigan 48098-2639
Phone: (248) 312-2000
https://www.flagstar.com/
January 13, 2017
The Honorable Orrin Hatch
Chairman
Committee on Finance
U.S. Senate
Washington, DC 20510
The Honorable Ron Wyden
Ranking Member
Committee on Finance
U.S. Senate
Washington, DC 20510
Re: Support for Steven Mnuchin to be Secretary of the U.S. Department
of the Treasury
Dear Chairman Hatch and Ranking Member Wyden:
I am pleased to offer my strong support for Steven Mnuchin as Secretary
of the U.S. Department of the Treasury.
At this moment of significant transition for our country, American
banks are ready to do more to extend credit, support communities, job
creation, and economic prosperity nationwide. As a leader of a mid-size
bank, OneWest, Steven has a distinct appreciation for how mid-size
institutions are perhaps best suited to do so and have an enormous
impact on a local level. He also has first-hand knowledge of how some
federal regulations are having adverse consequences that are inhibiting
our ability to successfully meet more of the credit needs of consumers
and businesses consistent with longstanding safety and soundness
principles.
I am absolutely confident that Steven will use his experience of
leading a mid-size bank, his considerable skill set and deep policy
knowledge to pursue regulatory relief and reform that will expand jobs,
incomes, and opportunities for Americans through economic growth.
I welcome his leadership and look forward to working with him.
Best regards,
Alessandro DiNello
President and CEO
Flagstar Bank
______
Hannah F. Buchan
January 11, 2017
The Honorable Orrin Hatch
Chairman
Committee on Finance
U.S. Senate
Washington, DC 20510
The Honorable Ron Wyden
Ranking Member
Committee on Finance
U.S. Senate
Washington, DC 20510
Dear Chairman Hatch and Ranking Member Wyden:
I write this committee to express my wish to see the swift confirmation
of President-elect Trump's nominee for Secretary of the Treasury, Mr.
Steven Mnuchin. Steven's qualifications for the lead Treasury position
are extensive--he is distinctly prepared for the job at hand. For
example, he was a partner at Goldman Sachs and member of the firm's
management committee. He understands intimately global financial
markets and at Goldman led a team of over 5,000 people with a $1-
billion technology budget. More recently, Steven demonstrated at
OneWest that he was committed to finding solutions for the company's
homeowner customers whenever possible.
Personally, I got to know Steven while working together on President-
elect Trump's Finance Committee. In every interaction, not only did he
conduct himself as a consummate gentleman and professional, but
furthermore, his passion and desire to serve the American people was
crystal clear. I am happy, but more importantly proud, to call Steven
Mnuchin a friend.
I believe it would certainly be in the best interest of the people of
the United States of America to confirm Steven as our next Secretary of
the Treasury.
Please let me know if I can be of any further assistance.
Sincerely,
Hannah F. Buchan
______
Continental Resources
405-234-9000
www.clr.com
January 10, 2017
The Honorable Orrin Hatch The Honorable Ron Wyden
Chairman Ranking Member
Committee on Finance Committee on Finance
U.S. Senate U.S. Senate
Washington, DC 20510 Washington, DC 20510
Dear Chairman Hatch and Ranking Member Wyden:
I am writing today in strong support of President-elect Trump's
nomination of Mr. Steven Mnuchin to serve as the next Secretary of the
Treasury.
Mr. Mnuchin will bring a wealth of real world knowledge and experience
to the position. He has spent the last 30 years working in banking,
technology operations, housing finance, and financial markets,
developing a deep understanding of economic policies that make him
uniquely qualified to serve as Treasury Secretary.
He has proven to be a solutions-oriented leader with strong team-
building and communications skills. These qualities will be needed for
the Treasury Department to work with Congress and the Trump
administration to craft a tax reform package that will spur economic
growth, create jobs for hard-working Americans and allow U.S.
businesses to compete in the global marketplace.
I believe Mr. Mnuchin is well-equipped to serve this country as
Secretary of the Treasury, with an unrivaled commitment to protecting
and supporting American workers.
I hope that members of this committee proceed with Mr. Mnuchin's
confirmation process on an expedited basis.
If I can be of further assistance in any way, please don't hesitate to
contact me.
Sincerely,
Harold Hamm
______
ESL Investments, Inc.
1170 Kane Concourse, Suite 200
Bay Harbor Islands, FL 33154
January 12, 2017
The Honorable Orrin Hatch The Honorable Ron Wyden
Chairman Ranking Member
Committee on Finance Committee on Finance
U.S. Senate U.S. Senate
Washington, DC 20510 Washington, DC 20510
Dear Chairman Hatch and Ranking Member Wyden:
I am writing today in strong support of President-elect Trump's
nomination of Steven Mnuchin to serve as the next Secretary of the
Treasury. If confirmed, Mr. Mnuchin would bring a wealth of knowledge
and experience to the office. He has spent the last 30 years working in
global capital markets, technology, operations, housing finance, and
regional banking. This provides him with a deep understanding of the
financial markets that are critically important for any Treasury
Secretary.
I have known Steven for 35 years, personally and professionally, and he
is a person of great integrity with strong values and ethics. The
diversity of his work experience and the diversity of those he has
worked with makes him perfectly qualified for this important position.
Steven cares deeply about getting America back to work, creating
opportunity for more Americans and ensuring the U.S. remains the
preeminent place to raise capital and start and grow a business. With
the prospects of tax reform on the agenda, we, in this country, have an
opportunity to unleash America's creativity and ingenuity while
incentivizing entrepreneurs.
I hope that members of the Committee proceed with his confirmation
process on an expedited basis.
If I can be of further assistance, please let me know how I can help.
Sincerely,
Edward S. Lampert
Chairman and Chief Executive Officer
______
LeFrak
40 West 57th Street, 23rd Floor
New York, NY 10019
T: +1 212-708-6600
https://www.lefrak.com/
January 9, 2017
The Honorable Orrin Hatch The Honorable Ron Wyden
Chairman Ranking Member
Committee on Finance Committee on Finance
U.S. Senate U.S. Senate
Washington, DC 20510 Washington, DC 20510
Dear Chairman Hatch and Ranking Member Wyden:
I am writing this letter in support of the nomination of Steven Mnuchin
for Secretary of the Treasury. I have known Mr. Mnuchin for well over a
decade and find him exceptionally qualified to carry out the duties of
the office, but first a word about my own background.
I am the CEO of a privately owned, family-held real estate development,
construction, and management business. My family's company has been in
business for over 100 years and has extensive holdings of multifamily,
commercial, retail, and hotel assets and operates in New York, New
Jersey, Delaware, Florida, California, and Washington. In addition, the
company has an Oil and Gas division located in Houston, Texas and
Investment arm that invests in public securities and venture capital. I
served on the Board of Directors of Bank United after it was
recapitalized as a result of the financial crisis. Furthermore, I
served a term as a member of the New York State Banking Board. My
business activities require me to deal extensively with financial
institutions and capital markets. Our firm has a flawless record as a
borrower, job creator, and corporate citizen. Some of the members of
the committee are familiar with our company and its projects.
I have known Mr. Mnuchin in his professional capacity as an executive
at Goldman Sachs, his career at Dune Capital, and his leadership of
OneWest Bank--one of two significant recapitalizations during the
financial crisis (the other being Bank United). Given Mr. Mnuchin's
varied and successful experience in finance, real estate, and private
equity, I find Mr. Mnuchin completely prepared and qualified to be
Secretary of the Treasury. Wall Street and Main Street banking
experience have made him both experienced in the capital markets,
lending, and the regulatory environment. This complementary set of
experiences will enable him to perform the duties of the office with
excellence.
On a personal basis, I know Mr. Mnuchin and his family quite well. He
is the devoted father of two daughters and a son and is an individual
of extremely high integrity. I have such a high degree of personal
trust and confidence in Mr. Mnuchin that he has served on the Board of
Directors of my family's trust company. Mr. Mnuchin is also charitable
and an advocate of health care and the arts. He is an individual of
extremely high character and intellect, and is choosing public service
over other financially lucrative opportunities.
Thank you for your consideration of Mr. Mnuchin's candidacy. Please do
not hesitate to call upon me if I can be of further assistance.
Sincerely,
Richard S. LeFrak
______
Ironhill Investments, LLC
12 E. 49th Street, 41st Floor
New York, NY 10017
T +1-646-274-1780
F +1-646-607-9194
[email protected]
January 11, 2017
The Honorable Orrin Hatch The Honorable Ron Wyden
Chairman Ranking Member
Committee on Finance Committee on Finance
U.S. Senate U.S. Senate
Washington, DC 20510 Washington, DC 20510
Dear Chairman Hatch and Ranking Member Wyden:
I am writing this letter in strong support of Mr. Steven Mnuchin,
President-elect Trump's nominee for Secretary of the Treasury.
Steven has had an outstanding 30-year career in finance and technology.
He has a unique combination of knowledge and insight into markets and
economies. At Goldman Sachs, I was a partner with his father for almost
25 years. Many years later, Steven, too, had a most successful career
there, ultimately running the I.T. Department of over 5,000 people. He
demonstrated a great ability to forge and lead a team that finds
solutions to uniquely difficult problems. In the recent months, I have
had the opportunity to renew my friendship with Steven as we worked
together on the Trump campaign. That time clearly reaffirmed the fact
that he is an outstanding individual who will serve with the utmost
dignity, respect and success.
It is my hope that your Committee will proceed swiftly and positively
with the nomination of Mr. Steven Mnuchin.
Please feel free to contact me if I can be of any further help.
Sincerely,
Lewis M. Eisenberg
Managing Partner
______
Jamie Enterprises
301 N. Canon Dr., Suite 302
Beverly Hills, CA 90210
http://www.jamieenterprises.net/
P: 310-860-9002
January 9, 2017
The Honorable Orrin Hatch
Chairman
Committee on Finance
U.S. Senate
Washington, DC 20510
The Honorable Ron Wyden
Ranking Member
Committee on Finance
U.S. Senate
Washington, DC 20510
Dear Chairman Hatch and Ranking Member Wyden:
I am writing today in strong support of President-elect Trump's
nomination of Steven Mnuchin to serve as the next Secretary of the
Treasury.
I have worked with Steven on two occasions, both at a civic institution
in the City of Los Angeles, and through his efforts leading the Finance
Committee of the Trump campaign. In both instances, I found him to be
whip-smart and deeply focused, someone capable of taking on a wide
array of responsibilities and executing flawlessly every time. Because
I have seen him in action, and because I know the range of his skill
set, the depth of experience, and unimpeachable nature of his
integrity, I can't think of a better person to lead the Treasury
Department. He is someone the American people can trust to do the right
thing on their behalf.
I hope that members of the committee proceed with his confirmation
process on an expedited basis.
If I can be of further assistance in any way, please do not hesitate to
contact me.
Sincerely,
Jamie McCourt
Founder and CEO, Jamie Enterprises
Former Co-Owner, President and CEO, Los Angeles Dodgers
______
California Bankers Association
1303 J Street, Suite 600
Sacramento CA 95814-2939
t 916-438-4400
f 916-441-5756
https://www.calbankers.com/
January 9, 2017
The Honorable Orrin Hatch The Honorable Ron Wyden
Chairman Ranking Member
Committee on Finance Committee on Finance
U.S. Senate U.S. Senate
Washington, DC 20510 Washington, DC 20510
Re: Support for Steven Mnuchin to be Secretary of the United States
Department of the Treasury
Dear Chairman Hatch and Ranking Member Wyden:
The California Bankers Association supports the confirmation of Steven
Mnuchin as the Secretary of the United States Department of the
Treasury. Mr. Mnuchin possesses the experience and credentials that
make him a well-qualified candidate. His knowledge and professional
competencies make him a valuable resource to the people of United
States.
Steven Mnuchin has substantive experience in finance and banking,
including a deep understanding of the financial markets that will serve
him well as the Treasury Secretary. With this extensive experience, he
will use his skills on behalf of the American people to pursue the
president's regulatory relief agenda. Lawmakers have reacted strongly
since the economic recession, enacting numerous layers of laws and
regulations resulting in significant bank consolidation. Consequently,
the regulatory environment is hampering banks' ability to help their
customers achieve financial success, support their communities, and the
economy.
Mr. Mnuchin is committed to enacting policies that encourage economic
growth. His reputation for bringing people together to solve complex
projects will prove invaluable in working with Congress and the
Administration to advance reforms that spur economic growth, create
jobs, help hardworking Americans, and allow businesses to compete
globally.
We appreciate this opportunity to encourage your confirmation of Steve
Mnuchin as Treasury Secretary. We believe he will serve the people of
this nation and the Treasury with wisdom and integrity. Please contact
us if you have any questions regarding our support.
Sincerely,
Rodney K. Brown
President and CEO
______
Movement Mortgage
January 3, 2017
The Honorable Orrin Hatch
Chairman
Committee on Finance
U.S. Senate
Washington, DC 20510
The Honorable Ron Wyden
Ranking Member
Committee on Finance
U.S. Senate
Washington, DC 20510
Dear Chairman Hatch and Ranking Member Wyden:
I offer today my full support of Mr. Steven Mnuchin as the next
Secretary of the United States Treasury.
As the founder and chief executive of Movement Mortgage, I launched our
company in 2008, amid the worst financial crisis in a generation, to
bring innovation, service, and integrity back to a broken business. As
a result, we have disrupted the entire industry with new processes to
serve American homebuyers and are now one of the 10 largest purchase
mortgage lenders in the United States with more than $12 billion in
annual originations.
Our country needs more business leaders equipped to make decisions that
will lead to economic prosperity and innovation. This is exactly why
Mr. Mnuchin is an excellent choice to be the next Treasury Secretary.
His willingness and foresight to lead the turnaround of bankrupt
IndyMac Bancorp, repositioning it as OneWest Bank, should be remembered
as one of the most successful turnarounds of this era. Mr. Mnuchin
inherited one of the most troubled mortgage portfolios in America, with
more than 178,000 loans in active foreclosure. Mr. Mnuchin and his team
worked tirelessly to find solutions for these families, extending more
than 101,000 loan modification offers many of which included offers to
forgive principal. Along the way, government auditors found OneWest to
have the lowest error rate and the highest effectiveness rate in the
entire federal loan modification program.
Mr. Mnuchin is an ideal candidate to lead the U.S. Treasury because I
believe he will tailor policies designed to help improve the flow of
credit to local businesses, the backbone of American commerce, and in
turn create jobs and investment that will drive economic growth across
the country. I urge you to confirm Mr. Mnuchin as our next Secretary of
the Treasury and empower him to lead us to sustained growth and
financial stability.
Sincerely,
Casey Crawford
Founder and Chief Executive Officer
Movement Mortgage
Fort Mill, SC
______
Old National Bank
One Main Street
Evansville, IN 47708
January 10, 2017
The Honorable Orrin Hatch The Honorable Ron Wyden
Chairman Ranking Member
Committee on Finance Committee on Finance
U.S. Senate U.S. Senate
Washington, DC 20510 Washington, DC 20510
Re: Support for Steven Mnuchin to be Secretary of the U.S. Department
of the Treasury
Dear Chairman Hatch and Ranking Member Wyden:
I am writing to issue my strong support for the confirmation or Steven
Mnuchin as Secretary of the U.S. Department of the Treasury. As
Chairman and CEO of Old National Bank and Chairman of the Mid-Size Bank
Coalition of America, I am confident that Mr. Mnuchin's deep, well-
rounded experience--which includes the successful leadership of the
mid-size bank OneWest--make him uniquely qualified to serve as Treasury
Secretary.
As members of your esteemed Committee are aware, mid-size banks are
essential to the success of our nation's economy. At Old National Rank,
we not only provide the capital to fuel small business growth within
our communities, we often serve as a catalyst for economic expansion
and community development by helping to forge partnerships and
strengthen relationships among business leaders, community leaders and
political leaders. We also strive to educate and empower at-risk
members of our communities through partnerships with non-profits,
financial education initiatives and homeownership assistance. This is
true not only for Old National, but for mid-size banks throughout our
great nation.
I believe Mr. Mnuchin understands the importance of empowering
community banks like Old National to continue to serve the financial
needs of our clients and communities. Furthermore, I believe his strong
knowledge of financial markets and extensive experience in our industry
will enable the Treasury Department to take a balanced, mindful
approach to regulation that protects our citizens while allowing
community banks to drive much-needed growth and expansion.
I am honored for this opportunity to encourage the confirmation of Mr.
Mnuchin. I believe he has the ideal background and credentials for this
vitally important position, and I welcome the opportunity to discuss
this topic further with members of your prestigious Committee.
Sincerely,
Bob Jones
______
Treasure Island
3300 S. Las Vegas Blvd.
Las Vegas, NV 89109
702-894-7182
800-955-4777
http://treasureisland.com/
January 11, 2017
The Honorable Orrin Hatch The Honorable Ron Wyden
Chairman Ranking Member
Committee on Finance Committee on Finance
U.S. Senate U.S. Senate
Washington, DC 20510 Washington, DC 20510
Dear Chairman Hatch and Ranking Member Wyden,
I am writing in great support of Steve Mnuchin to serve as our nation's
next Secretary of the Treasury, as nominated by President-elect Trump.
Mr. Mnuchin is highly qualified for this position and will be
instrumental in helping President-elect Trump achieve his goals of
economic growth. He has my firm support.
Please feel free to contact me if I can be of any further assistance.
Sincerely,
Phillip G. Ruffin
Owner
______
Blackstone
345 Park Avenue
New York, NY 10154
t + 1 212-583-5823
f + 1 212-583-5719
[email protected]
January 17, 2017
Dear Members of the Committee:
I strongly recommend that the Committee, after its customary hearings,
promptly confirm my good friend Steven Mnuchin for United States
Treasury Secretary. As the Committee considers Steven's nomination, I
thought I might be able to contribute to the Committee's deliberations
as someone who has observed his work and character.
Throughout his career, whether at Goldman Sachs or negotiating with the
FDIC during the financial crisis, Steven has shown drive and
persistence, combined with skill and integrity to solve complex
problems.
I have known Steven for 20 years and believe him to carry our national
interest close to his heart. His work as an investor, innovator, and
philanthropist has given him the insight and empathy to serve our
Country and the Administration with distinction. Steven has been an
effective mentor to dozens of young executives over many years. He has
nurtured their talent and guided them to help them realize their
dreams. Steven is widely respected for his good judgment, good humor,
and integrity. Having spoken with him at length about the state of our
economy, he is deeply knowledgeable about the intricacies of financial
markets and policy.
Finally, I had the pleasure of hosting Steven at a gathering in New
York City the night before this year's election. He was passionate
about changing the economic fortunes of all Americans by electing
Donald Trump President of the United States. I have full faith in his
abilities to competently and dutifully serve the United States as our
Treasury Secretary.
Thank you again for your time and consideration.
Stephen A. Schwarzman
Chairman, CEO, and Co-Founder
______
Thiel Capital LLC
One Letterman Drive, Building C, Suite 400
The Presidio San Francisco, CA 94129
P 415-248-5140
F 415-248-5141
January 13, 2017
The Honorable Orrin Hatch The Honorable Ron Wyden
Chairman Ranking Member
Committee on Finance Committee on Finance
U.S. Senate U.S. Senate
Washington, DC 20510 Washington, DC 20510
Dear Chairman Hatch and Ranking Member Wyden:
I am writing today to support President-elect Trump's nomination of
Steven Mnuchin to serve as the next Secretary of the Treasury.
The next Secretary will lead the greatest reform of our tax code and
our public finances in more than 30 years. This reform is desperately
needed, and its success will depend on confirming the right person for
the job. I strongly believe that the right person is Steven Mnuchin.
Mr. Mnuchin thoroughly understands finance. He gained his knowledge
from long experience working at every level from home mortgages to
global markets. He has a vast store of energy, as he has shown over his
successful 30-year career. Now his knowledge, experience, and energy
should be put to work for the benefit of the whole country.
Because economic policy reform is urgent and Mr. Mnuchin is uniquely
qualified to get it done, I urge members of the Committee to proceed
with his confirmation process on an expedited basis.
Sincerely,
Peter Thiel
______
Thomas P. Vartanian
January 12, 2017
The Honorable Orrin G. Hatch
Chairman
Committee on Finance
U.S. Senate
Washington, DC 20510
The Honorable Ron Wyden
Ranking Member
Committee on Finance
U.S. Senate
Washington, DC 20510
Dear Chairman Hatch and Ranking Member Wyden:
I am writing in my personal capacity to set the record straight
regarding the acquisition of IndyMac Bank in 2009, and to offer an
objective assessment of Steven Mnuchin's formidable intellect,
unflappable demeanor, and significant financial skills as I saw them on
display in that transaction.
I have spent more than 40 years dealing with the resolution of
failed banks. As a former attorney at the Office of the Comptroller of
the Currency and then General Counsel of the Federal Home Loan Bank
Board and FSLIC, I authorized, supervised, and worked on the
receivership and/or sale of more than 430 failed institutions, all with
an eye on the need to husband the modest financial resources available
to us. After that, in private practice, I represented investors in
dozens of FSLIC, RTC, and FDIC failed-bank acquisitions, including the
acquisition of IndyMac. I have also been an adjunct professor of law at
Georgetown, George Washington, and Boston University Schools of Law,
and guest lecturer at Harvard Law School.
Several core principles about bank failures need to be appreciated
in order to put the IndyMac transaction in context.
It is the FDIC's responsibility to either find an acquirer to infuse
new capital into a failed bank, or liquidate it--a very costly solution
for the FDIC that will result in significant financial dislocations for
customers and employees.
When a bank fails, it is usually in worse condition than anyone--
even the FDIC--imagined, and its assets are likely to be worth less
than its financial statements reflect.
The FDIC has a finite deposit insurance fund, so it must find
private capital to recapitalize failed banks--every dollar that an
investor puts at risk to purchase a failed bank saves the FDIC, and
potentially the U.S. taxpayer, multiples of those dollars.
If no acquirer is willing to recapitalize a failed bank, the FDIC
will likely liquidate it by paying out insured depositors, selling its
increasingly depreciating assets at fire sale prices, and terminating
its employees.
Federal law requires the FDIC to conduct an auction process for a
failed bank and choose the ``least cost'' bid with regard to the
financial assistance that it provides to the acquirer from its
insurance fund.
When an investor offers to acquire essentially the ``whole bank''
from the FDIC rather than just pieces of it, the failed bank can remain
open the next day under new ownership; no depositor loses anything and
the employees generally keep their jobs.
In 2007, I and my law firm were engaged to represent an investor
that eventually came to be included in the final group that was invited
by the FDIC to acquire IndyMac after a protracted bidding process in
which the FDIC evaluated proposals from more than 20 bidders. See
https://www.fdic.gov/bank/individual/failed/IndyMac_bid_summary.html.
At that time, IndyMac Bank was the largest bank failure that had ever
occurred in the United States, so the loss that the FDIC and
potentially U.S. taxpayers could have incurred was anticipated to be
substantial. The fact that IndyMac Bank had been in conservatorship
with the FDIC for 8 months after it was seized by the OTS was unusual
and raised substantial operational, legal, and financial issues for the
group. It was my job to advise my client on the transaction that Mr.
Mnuchin structured to ensure that it was in conformity with applicable
law and in its best interests. My firm and I did not represent Mr.
Mnuchin or his company.
The investor group, of which Mr. Mnuchin's firm was also part, took
the enormous risk of paying $13.9 billion for IndyMac, of which $1.3
billion was investor cash which recapitalized IndyMac--$1.3 billion
that the FDIC did not have to spend to resolve that bank failure. The
only guarantees it received were a set of very complicated and
conditional financial assistance agreements from the FDIC to the extent
that the value of the assets over time did not turn out to be what the
parties expected. Such a financial assistance package is typical in
most failed bank acquisitions over the last 40 years.
The economic well-being of bank customers, the FDIC deposit
insurance fund, bank employees, and the U.S economy is dependent on
parties being willing and able to invest large amounts of capital into
failed banks based on a financial partnership between the private
sector and the FDIC. Failed bank acquirers do not expect
congratulations or a medal for patriotism in return for taking those
financial risks, but they do hope to make a return on their investment
through the excruciatingly hard work that follows such an acquisition
to turn a failed bank into a viable and productive member of its
community. That is the formula that makes our financial system work and
allows consumers to sleep at night.
In the IndyMac transaction, to my knowledge, Mr. Mnuchin and the
investors adhered to all aspects of the FDIC's requirements, persevered
through months and months of anguish and negotiations, and did what
even the FDIC had not expected. They invested $1.3 billion of their own
cash to acquire the entire bank at the least cost to the government,
earning the right to keep it open for business for the benefit of its
customers, employees, and new shareholders.
The clear proof of how beneficial the acquisition proposal was to
the FDIC was demonstrated by the fact that it had not actually expected
to sell IndyMac as a whole bank. In January 2009, the FDIC informed us
that as the winning bidder, we should expect to receive drafts of more
than 30 acquisition contracts. The reason why there were so many
contracts to be negotiated was that the FDIC's lawyers had already
prepared the paperwork to sell IndyMac in multiple asset pools to
multiple parties, rather than as a whole bank. Indeed, the FDIC
disclosed that of the six final bidders in the process, only the
Mnuchin group's bid was for the whole bank. See https://www.fdic.gov/
bank/individual/failed/IndyMac_bid_summary.html. If the disposition of
IndyMac had proceeded in any other fashion, it would have been much
more costly to the FDIC and likely led to job losses and branch
closures.
While I did not represent Mr. Mnuchin, I came to admire his
abilities and saw a businessman who, as far as I was concerned, was
something special. I have not had dealings with nor even spoken to him
since that time, but was not surprised at all when President-elect
Trump nominated him to be Secretary of the Treasury given the enormous
skills that I saw him display during the 9 months that I had the
privilege of working with him to complete the acquisition of IndyMac
Bank.
Sincerely,
Thomas P. Vartanian
______
Walter J. Mix III
January 12, 2017
The Honorable Mike Crapo
Chairman
Committee on Banking, Housing, and Urban Affairs
U.S. Senate
239 Dirksen Senate Office Building
Washington, DC 20510
Dear Chairman Crapo,
I am a former Commissioner of the California Department of Financial
Institutions (now Department of Business Oversight). I have extensive
experience in financial services regulatory and safety and soundness
issues.
I am writing to endorse and to support Mr. Steven Mnuchin's effort to
be confirmed as Secretary of the U.S. Treasury. Mr. Mnuchin has broad
experience in housing, finance, trading, banking, and in particular he
possesses a broad understanding of the financial markets that would
serve him well as the U.S. Treasury Secretary.
When he retired from Goldman Sachs in 2002, he was managing a team of
5,000 people and a $1-billion technology budget. He knows how to deploy
technology and people to improve business outcomes.
He has a reputation of bringing people together to tackle complex
projects. This would serve him well as he works with Congress and the
Administration to develop a tax reform package that would spur economic
growth, create jobs, help hardworking Americans, and allow businesses
to compete on a global basis.
With deep experience in the finance and entertainment industries, he
would use his strong negotiation skills on behalf of the American
people to pursue the President's pro-growth tax reform and regulatory
relief agenda that would help create hundreds of thousands of jobs.
As you recall, the California economy was devastated by the financial
crisis starting in 2007 as mortgage defaults started to occur and
property values, especially in overbuilt areas, started to decrease.
The crisis accelerated when IndyMac Bank failed. I am a long-time
resident of Pasadena, CA and observed the public outcry when it
appeared that thousands would lose their jobs, and when people lined up
at branches to withdraw their money in a bank-run scene straight out of
``It's a Wonderful Life.''
As a former financial regulator, I was amazed to see that, unlike in a
normal bank failure where the bank is closed on a Friday and reopens
the following Monday under new ownership, no one showed up to take on
the IndyMac business. It was almost unprecedented for the FDIC to have
to operate the bank for nearly 9 months before a credible bidder showed
up. That bidder was Mr. Mnuchin.
The OneWest acquisition of IndyMac Bank (and, later, First Fed and La
Jolla) was great news for Southern California in many ways. First, it
preserved jobs and credit availability in California that otherwise
almost certainly would have disappeared. Second, it launched new lines
of business that helped small and middle-market businesses in the area
expand and create jobs. Third, through the OneWest Foundation, it
contributed to the local community by sponsoring important non-profits
like Junior Achievement, the Venice Family Clinic, Boys and Girls Club,
the Los Angeles Police Foundation, and others.
While some have criticized OneWest over mortgage foreclosures, those
foreclosures were already underway before Mr. Mnuchin and his partners
arrived to save the bank. The real story is how hard Mr. Mnuchin's team
worked to find the best foreclosure avoidance solutions for the largest
number of customers. After a major financial crisis, it should not be
surprising that some unfortunate individuals lost jobs, suffered other
tragedies, and were not able to repay their mortgages on any terms;
those foreclosures are human tragedies. But the real story here is how
much better OneWest was at saving homes than most banks. Government
reviews show that OneWest offered more than 100,000 loan modifications
to delinquent borrowers, as well as that those loan modifications
included more principal forgiveness than any similarly sized bank.
Importantly, when foreclosure was the only option, OneWest made
mistakes far less often than others in the industry.
The media has also criticized OneWest for not cooperating with a
California state attorney general investigation of its mortgage
practices. As the former California banking regulator, I believe it is
important to remind people that, for most of American history, we have
had a ``dual banking'' system consisting of state banks and federally
chartered banks. State regulators have limited authority to directly
regulate national banks, and what is clear is that, while OneWest was
not subject to oversight by a state attorney general in that context,
the issues involved were thoroughly examined by federal regulators in
the Obama administration. Those federal regulators were not known for
being lax on bank misconduct, and so the results of their reviews are
all the more striking: OneWest was highly compliant, was effective in
saving homes by modifying tens of thousands of delinquent mortgages it
inherited from IndyMac Bank, and was subject to extensive regulatory
oversight in the process.
Mr. Mnuchin fought for his customers, and he's going to fight for
American workers. He is committed to making sure we enact policies that
set the U.S. economy on a course for long-term growth and help American
workers and businesses.
Mr. Mnuchin's well-known commitment to accountability and his integrity
will serve him well as Treasury Secretary. For all of these reasons, I
endorse and support Mr. Steven Mnuchin for Secretary of the U.S.
Treasury.
Sincerely,
Walter J. Mix III
______
Submissions for the Record From Hon. Robert Menendez,
a U.S. Senator From New Jersey
Statement of Cristina Clifford
Good afternoon. My name is Cristina Clifford. I'm hoping that by
sharing my story with you today I can explain why I believe confirming
Steve Mnuchin for Treasury Secretary would be a serious mistake for our
country. I experienced firsthand what it was like to be subject to
OneWest's greed, and I can tell you that the person who ran OneWest
Bank should not be the person responsible for oversight of the U.S.
economy.
In 2001, when I was 20, I bought my first home--a great condo in
Whittier, California, just outside Los Angeles. I was young, but I've
always been a motivated self-starter. I'm also a self-employed, small
business owner--my primary source of income.
Things were going just fine, and I was never, ever late on my
mortgage payments. However, that changed in 2008--like it did for so
many of us--when the economy took a turn for the worse. My business
struggled, and I started relying on credit cards to stay afloat. In
March of 2009, I was unable to make my mortgage payment for the first
time in 8 years as a homeowner.
I called OneWest directly to see what options I would have for
keeping my home. They told me flat out that because I had never been
delinquent, they had no way of helping me. In order to get help, they
said, I would have to fall behind on my payments. Of course this was
misleading--and, I've since found out, a common tactic that mortgage
lenders use to push people into default.
From there, I began the long, long process of loan modification
through the Home Affordable Mortgage Program (or HAMP). I sent in
numerous documents to OneWest, and in May, I was offered my first loan
modification. I was thrilled--the new payments would fit perfectly in
my budget, so I signed the loan modification papers and sent them via
FedEx along with a check for my first payment under the new, modified
payment amount.
In July, I expected OneWest to send me a statement with the new
lower payment amount. Instead, I received a letter saying that they had
not received my loan modification paperwork, so the modification terms
were no longer valid. I called them and OneWest confirmed that they had
not received my returned loan modification agreement. I knew right away
this wasn't right, because they had cashed the check for the first
modified payment in the same FedEx envelope. That they managed to cash
the check but completely neglect the loan modification agreement--
again, in the same envelope--is absolutely outrageous.
I had no choice but to apply again, this time submitting even more
documents; I was told to submit and resubmit many duplicative documents
in many different formats. Despite how difficult OneWest made the
process, I did everything they asked because I was determined to keep
my home.
On August 3, 2009, I received a notice of default from OneWest but
proceeded with my second attempt at modifying my loan. I received my
second loan modification offer later that month. The terms were almost
identical to the offer they made me in May, so I quickly signed the
offer and mailed it in with another check. In October, I got a letter
exactly like the one I received earlier saying that they had not
received the loan modification paperwork and that the modification
offer was no longer valid. Yet as they did the first time, they cashed
the check I sent in with the signed offer.
At this point, I felt I had no choice but to get an attorney, who
worked to get my foreclosure postponed while the loan modification
process played out. He spoke with people at OneWest who told him that
they would postpone the sale of my condo until the loan modification
process was completed.
This simply wasn't true: on the evening of December 3, 2009, I
received a knock on my door from a man that introduced himself as the
new owner of my property. And in March of 2010, I received a final
notice telling me that I had 5 days to leave my apartment--5 days to
pack up the 10 years of my life I'd spent in my home.
The reason I am sharing my story is because there are so many other
people out there like me who got left in the dust. Steve Mnuchin
profited from people like me, even when we did everything we could to
keep our homes. You might say that Steve Mnuchin did not personally
authorize OneWest to cheat me out of my home, but his fortune rose as a
direct result of managing a company that routinely engaged in
irresponsible behavior.
The Treasury Secretary will be tasked with making sure that the
economy is working in a way that benefits all of Americans, not just
the top 1%. However, Steve Mnuchin is not that person; he is just the
opposite. Please make a statement for people like me and oppose his
confirmation as Treasury Secretary.
______
Statement of Paulina Gonzalez
Senate Forum on OneWest Foreclosure Victims
January 18, 2017
My name is Paulina Gonzalez. I am the executive director of the
California Reinvestment Coalition. Over the past 30 years, CRC has
grown into the largest state reinvestment coalition in the country with
a membership of 300 organizations that serve low-income communities and
communities of color.
I want to begin by first thanking Senator Warren for convening this
forum and the assembled Senators here today. It is critically important
that our elected representatives and the American public hear directly
from people who have lost their homes due to the egregious practices
and abuses by OneWest Bank under Mr. Mnuchin's leadership, before
deciding on his nomination to the high and important office of Treasury
Secretary.
I also want to thank the courageous women who have traveled from
afar to testify here today. Over the years, we've heard similar stories
that are all too familiar. Despite making every attempt to do the right
thing, these working families lost their homes due to aggressive and
malicious foreclosure practices at the hands of Mr. Mnuchin and his
bank. We are grateful that they have stepped forward to share their
stories. It is not easy to speak publicly about the loss of your
family's home.
Unfortunately, the people here today represent only a tiny fraction
of the over 60,000 families impacted by OneWest foreclosures across the
country. I'm going to share some data and information with you in the
next few minutes, but know that the wreckage from OneWest is really not
about numbers, data, and legal briefs. It's about the tens of thousands
of Americans who have suffered devastating financial and personal
losses as a result of OneWest's abusive foreclosure practices.
Whether it's the story of the Minnesota woman who sought a loan
modification from OneWest and returned to her home in a blizzard only
to find that her locks were changed. Or the 90 year old woman who was
nearly kicked out of her home for mistakenly paying 27 cents less than
OneWest said she owed. Or the 80 year old former Christian missionary
who was notified at his home that Financial Freedom was foreclosing on
him because the bank said it had no record of him living there. The
issue is the same: instead of helping people stay in their homes, Mr.
Mnuchin devised a foreclosure machine that used every trick in the book
to profit from their suffering.
Large Scale Foreclosures. And foreclose he did. CRC and Urban
Strategies Council analyzed data showing that OneWest foreclosed on
over 36,000 families in California and 24,000 families nationally. All
of these foreclosures occurred after Mr. Mnuchin purchased IndyMac
Bank. In addition, we suspect that OneWest's reverse mortgage
subsidiary, Financial Freedom, has foreclosed on more seniors, widows,
widowers, and heirs than any other company participating in the federal
Home Equity Conversion Mortgage program. A Freedom of Information Act
request that we filed with HUD revealed that Financial Freedom had
foreclosed on over 16,000 seniors, widows, widowers, and their
families, or 39% of all Home Equity Conversion Mortgage foreclosures,
roughly twice the rate one would expect given the bank's market share.
OneWest servicing and modification record. Mr. Mnuchin may defend
his record by saying that he inherited these bad loans, that the
foreclosures were inevitable, and that his bank followed the law in
dealing with his customers. We strongly disagree, and it appears that
we are not alone. In a CNN story that aired on January 3rd about Mr.
Mnuchin and Financial Freedom, a HUD spokesperson was quoted as saying,
``while HUD doesn't dispute that it has strict rules for government
backed reverse mortgages, OneWest had the ability to give survivors
more time but chose not to.''
Mr. Mnuchin's spokespeople have also praised his modification
record. But, we are not sure there is much to praise. Data from the
Treasury Department in 2013 shows that OneWest had among the highest
denial rates for the Home Affordable Modification Program, the Federal
Government's main foreclosure prevention effort. Under Mr. Mnuchin,
OneWest denied three-quarters of the thousands of loan modification
requests that came in from families trying to save their homes. OneWest
was much more likely to deny loan modifications under this program than
peers such as Bank of America or Wells Fargo.
Attorney General Memo shows ``widespread misconduct.'' A January
2013 memo from the California Attorney General's office revealed a
staff investigation finding of ``widespread misconduct'' at the bank,
including backdating thousands of foreclosure documents, improper
foreclosure auction credit bidding which meant the bank could claim tax
exemptions it wasn't entitled to, proceeding with foreclosures without
the proper authority to do so, and speeding up foreclosure timelines.
All of these practices deprived working families in California a fair
chance to stay in their homes.
Redlining Complaint highlights disparities in home lending and
branching. Some may note that other banks had more foreclosures in
California and nationally, and this is certainly true. This makes sense
given that IndyMac was not the largest national lender. But we have
labeled OneWest a ``foreclosure machine'' not only because it
foreclosed on more than 60,000 American families and because of its
aggressive foreclosure practices, but because it seemed to do little
else. In fact, we estimate that since Mr. Mnuchin took over the bank,
OneWest pushed through nine times as many foreclosures as home
purchases and refinance loans in neighborhoods of color in California.
The Treasury Secretary leads our economy. The Secretary helps
oversee our banking system and will have much to say about important
policies relating to banking, housing, and economic development that
will impact all Americans. The country needs a Treasury Secretary who
will consider the needs of all Americans, including working class
Americans. Mr. Mnuchin's tenure at OneWest Bank shows him to work in
his interest and in the corporate interest, at the great expense and
harm to everyday Americans.
______
Statement of Colleen Ison-Hodroff
Dear Assembled Senators:
My name is Colleen Ison-Hodroff. I am 84 years old. I am a resident
of Minneapolis, MN. My husband Monroe Hodroff and I purchased our home
located at 2753 Ewing Avenue in 1963 as a home for our family of six
children. They called us the Brady Bunch of Ewing Avenue. Our house was
the heart and soul of our family. Monroe and I were married for 55
years, and we successfully ran four small grocery stores.
I would like to thank you all very much for allowing me to share my
story.
I am here today because Financial Freedom, my reverse mortgage
servicer, is trying to foreclose on my home. This is despite the fact
that when my husband Monroe and I took out this loan, they told us that
I could remain in the home if Monroe should die before me.
In July of 2006, my husband and I decided to take out a reverse
mortgage loan with Financial Freedom. It was a very complicated
process. Someone came to our house and I was asked to sign a number of
papers. Usually, Monroe handled the financial matters for our
household. We were told that I could live in the house if Monroe passed
away. It was never Monroe's or my intention that the survivor of the
two of us would have to sell the house or leave if one of us died. We
would not have signed for the loan if we thought that was the case.
My husband Monroe passed on September 12, 2014. A mere 10 days
later, despite what we had been told, Financial Freedom contacted me
and told me that I needed to pay off the loan immediately. This was
news to me. I was in no financial position to do so. Since then,
Financial Freedom has been trying to foreclose on me.
I think this is an injustice in that an elderly woman was deceived,
and now Financial Freedom is trying to take my home.
Why would Financial Freedom do this to me? I relied on what I was
told, and now they are trying to kick me out of our family home. How
was I supposed to know if what I was told wasn't true? What I am
supposed to do now?
My understanding is that in such circumstances, Financial Freedom
blames HUD for it kicking out Non-Borrowing Spouses. Experts who have
reviewed my paperwork have told me that this isn't even a HUD-backed
loan, so Financial Freedom has no one to blame but themselves. It seems
Financial Freedom should be working to keep people like me in their
homes, and not fighting to kick us out.
I hear that Steve Mnuchin was a leader of the bank that is doing
this to me and other seniors. I do not think a man like that should be
the Treasury Secretary and in charge of our economy. We can't let that
happen.
Thank you again for allowing me to tell my story on behalf of those
who have had bad dealings with Financial Freedom and OneWest.
______
Statement of Heather McCreary
My name is Heather McCreary. My husband Jack, my two kids Jaden and
Clara, and I are from Sparks, Nevada. This is my story about how my
family's American Dream turned into a nightmare. I'm sharing my story
with the hope of explaining why we cannot let Steve Mnuchin become
Secretary of the Treasury. Putting Steve Mnuchin in charge of the
Treasury Department would mean that a man who profited off the
struggles of families like mine would be one of the most powerful
people in the U.S. economy.
For a while, it was looking like our shot at the American Dream was
going pretty well. In 2006, Jack and I bought our dream home in
Sparks--just a mile away from my parents, and a short walk to Jaden and
Clara's school and to parks the kids could play in. I was working as a
home health care worker and Jack was working in construction, and
together we were managing just fine.
Then, in 2008, when the economy started to get worse, I was laid
off. The following year in 2009, Jack was laid off too. Though Jack was
able to find another job pretty fast, he had to take a big pay cut--
from about $25 an hour to $8.50 an hour. Between the cut in Jack's pay
and the loss in income I experienced when going on unemployment
insurance benefits after I got laid off, we were pinched and we were
drowning financially.
However, we were determined to keep our dream home, so Jack and I
were tenacious about doing whatever we could to get help. We sought
help from the Hope Now Alliance, which is an alliance of HUD-approved
counselors who provide free foreclosure help, and from the Washoe
County Senior Law Project.
We worked side-by-side with both organizations to do everything
required of us by our mortgage servicer IndyMac, which later became
OneWest. When we first asked for help, OneWest gave us a short
forbearance and allowed us to make a smaller payment for several months
with the goal of a reduction in our monthly mortgage payments through
the Home Affordable Modification Program (or HAMP). By applying for the
HAMP program, we thought we were back on the road to keeping our home.
We complied 100 percent with OneWest's requirements for HAMP--we
were incredibly nervous about being able to keep our house, so we were
extremely careful to make sure we did everything we could to keep the
process going forward. Our application for HAMP was processed and we
were approved for a modification. I sent in the signed paperwork and
the first payment under the modified payment amount.
But then the process started to fall apart. After a whole 30 days,
OneWest returned our personal check and told us that only certified
checks would be accepted, so they were now voiding the modification
offer. We had followed the instructions to the letter on OneWest's
paperwork, crossing our ``T''s and dotting our ``I''s. But in the end,
this didn't matter--and OneWest's rejection of our HAMP application put
us on the road to foreclosure.
We applied two more times for loan modifications over the next 6
months because we were given assurances by people at OneWest that they
would approve our application. We again complied with every request
OneWest made of us, taking care to send in extra documents whenever
OneWest requested them.
But as far as I can tell, OneWest never attempted to process the
loan modification. The foreclosure went through and we lost our home on
September 10, 2010. The foreclosure left us without a home, and finding
a new rental was extremely difficult because of our credit. Juggling
the demands of raising our twins and this was so hard--the foreclosure
even meant that our kids had to miss school. Eventually we did find a
new place, but we had to pay an outrageous rent--even though it was not
a good home for us at all.
It's hard to explain the shame, embarrassment, and grief Jack and I
felt. I've cried a river of tears over this. I really didn't think we
were asking too much: we wanted to hang on to our home for the sake of
our kids, and we did everything we could to stay in our home. And while
I will probably never know exactly what OneWest did, the outcome of my
story proves that Steve Mnuchin's company had no interest in helping
us. They wanted to foreclose because they were focused on their
profits.
Putting Steve Mnuchin in charge of the country's financial system
is an insult to families like mine: families who worked hard and did
everything they could to get by after the economy collapsed. Take it
from my experience--I know he will not be looking out for working
people. Instead, he will use his position to make the economy work
better for people like himself. On behalf of my family and others like
it, I ask you to please reject Steve Mnuchin as Treasury Secretary.
______
Statement of Sylvia Oliver
Good afternoon, Senator Warren and other senators gathered here
today. My name is Sylvia Oliver. I am a homeowner from Scotch Plains,
NJ. I received my mortgage from IndyMac in May 2008, and about a month
later, IndyMac failed. I want to share my story because it is more than
a house--it is a home for me, my husband and my three children and my
grandchildren.
In early 2009, my husband and I were facing financial difficulties.
Because of the economy being in bad shape, my husband was between jobs.
We reached out to OneWest to request a modification. We were told that
we had to make three payments in order to move forward on a permanent
modification, and so we made those three payments.
After making those payments, I reached back out to OneWest to find
out what the next steps were. But I couldn't get a straight answer from
them, so we continued making partial payments, even though it was a
challenge for us financially.
In February 2010, I submitted a modification application to OneWest
Bank. About 6 weeks later I received a Notice of Intent to Foreclose.
However, the person I had been talking to at OneWest, a man named
Albert, told me not to worry, and encouraged me to continue submitting
updated documents to the bank.
So, for the next year, I would submit new documents to the bank,
through FedEx and through faxes. And, every week, I would call Albert
and ask if he had an update on my situation, and every week I was told
there was no answer and to call back the next week.
After a year of my weekly phone calls, I finally received a denial
letter from OneWest in February 2011, when they said they couldn't
modify my loan. Albert at OneWest told me I could re-apply for a
modification, which I did because I really wanted to keep our home.
For the next several months, the cycle would repeat, with the bank
telling me to re-apply for a modification, me believing that they were
sincere, and then a few months later, being told we had been declined
again. This was surprising because during this time we were back on our
feet, and our incomes were both increasing, which meant we were in a
better position to pay for our mortgage.
At the end of the 2015, I received another notice of foreclosure
from the bank. At this point, it became clear to me that OneWest never
had any intention of modifying the loan in such a way that they would
still get paid back and we would be able to keep our home.
In March of 2016, I hired a lawyer because I thought they might
have more success working with the bank than I did. At my attorney's
advice, I filed a Chapter 13 bankruptcy as part of another modification
application.
That process went on for about 5 or 6 months, with the same cycle
of me sending paperwork over and over to the bank, and the same answer
again. Last year, I was facing foreclosure 3 weeks before Christmas;
however, that was then postponed until this month. In fact, I was
supposed to be foreclosed on by OneWest today, however, after Senator
Menedez's office called OneWest, I learned that my sale had been
postponed until next month.
Earlier this month, I sought help from a HUD approved housing
counselor. She worked with me and my husband to document our income and
to submit a modification application. After analyzing our situation,
she was surprised to hear that we had not qualified for a modification
earlier, especially since my husband and I both have good incomes.
As of right now, I'm still facing foreclosure next month, and I
know in my heart this is because OneWest's only intent was to foreclose
on my home. This bank has had ample opportunities to modify my loan. In
fact, they told me that they own the loan, so I know they can't blame
this situation on an investor not allowing them to modify my loan.
Nobody should have to go through the experience that I've gone
through during the past several years with OneWest Bank. It's been very
painful and stressful not knowing if my kids and my family are going to
have a home to live in, or if it's going to be foreclosed on. I would
ask you to remember my experience when you consider whether Mr. Mnuchin
is qualified to lead the Department of the Treasury. As the CEO and
Chair of OneWest Bank, Mr. Mnuchin had the opportunity to help families
like mine with responsible loan modifications, and he didn't. I don't
think this is a track record that anybody should be proud of.
______
Prepared Statement of Steven Terner Mnuchin, Secretary-Designate,
Department of the Treasury
Chairman Hatch, Ranking Member Wyden, and members of the committee,
it is an honor to appear before you today. I am grateful and humbled by
President-elect Trump's nomination to serve as the Secretary of
Treasury. It is truly an honor and a privilege to be considered for
this position.
Thank you to all of the members I have already had an opportunity
to meet with during this process. I enjoyed meeting you and learning
more about the issues that are important to you. For those members whom
I didn't get a chance to meet with, if confirmed, I look forward to
meeting with you as well.
I would like to thank Chairman Hatch and his staff for taking so
much time to work with me and support me through this process. In
addition, I would like to introduce my fiancee, Louise Linton, and my
children Emma, JP, and Dylan who are here with me today, and thank them
for their unwavering support. I would like to introduce my brother,
Alan Mnuchin and his wife Alessandra, and my father, Robert Mnuchin,
who has always supported me, and taught me that hard work,
determination, and the ability to bring people together can make
anything possible. I would like to acknowledge my late mother, Elaine
Terner Cooper, who was an inspiration to me. I would also like to
acknowledge my grandparents, Emanuel and Mathilda Terner, who were also
a tremendous influence in my life. My grandfather was a first
generation American whose father emigrated from Europe. He truly
embodied the American dream. He started out blowing glass bottles by
hand and later built Midland Glass into one of the largest glass
manufacturing companies in the United States, with five factories
employing thousands of workers. My first job was in his factory when I
was in high school. It was there that I first learned the importance of
humility, hard work, and commitment.
personal background
For those of you who don't know my background, I studied Economics
at Yale University. During the summers I worked at Salomon Brothers
under the mentorship of Lew Ranieri and Mike Mortara, who started the
mortgage backed securities market. I learned the importance of this
market in providing ample and sound financing of housing for American
families. At the age of 22, after graduating from Yale, I got a job at
Goldman Sachs, where I spent the next 17 years. I started on a folding
chair in the mortgage department. Nine years later, and after many
sleepless nights, I was put in charge of mortgages, U.S. Government
bonds, and municipal securities. Several years after that, I worked
directly for future Secretary of the Treasury Hank Paulson as the
firm's chief information officer. In that role I oversaw 5,000 people
and a $1-billion budget. While at Goldman Sachs, I learned the
importance of the financial markets in providing liquidity and capital
to businesses, governments, and consumers.
A few years later, I decided to leave Goldman Sachs to build an
investment business and worked briefly at ESL Investments before
starting my own investment business, Dune Capital Management.
Throughout my career, my commitment was to my clients and
shareholders, for whom I worked tirelessly to get the best results.
Thirty years later, my commitment is now to the American people for
whom I will work tirelessly by helping to grow our economy and create
jobs.
indymac
I'm eager to share with you why I believe I will serve well as
America's next Secretary of the Treasury. But first I want to correct
the record about my involvement with IndyMac Bank.
Since I was first nominated to serve as Treasury Secretary, I have
been maligned for taking advantage of others' hardships in order to
earn a buck. Nothing could be further from the truth.
During the summer of 2008, I saw the devastation that was caused by
the housing crisis when I watched people line up to get their life
savings out of IndyMac Bank. It was the middle of the financial crisis
and despite the global panic, I saw a way to save the bank. I applied
for a banking charter and submitted a bid to the FDIC for IndyMac. On
December 31, just before midnight, we signed a binding agreement with
the FDIC. They later confirmed that our bid was almost $1 billion
higher than the next best bid. We were willing to invest $1.6 billion
into the costliest bank failure ever to the FDIC. We did this because
we believed in our ability to rebuild and create a successful regional
bank. We believed in recovery for the American economy.
Let me be clear: my group had nothing to do with the creation of
the risky loans in the IndyMac loan portfolios. When we bought the
bank, we assumed these bad loans, which had been originated by previous
management. Some of those individuals had to answer to Federal
authorities for their bad lending decisions.
We invested $1.6 billion of capital into a failing financial
institution when most investors were running for the hills. We renamed
the business OneWest Bank and saved thousands of jobs. We developed a
prospering community banking franchise in southern California as most
major banks were pulling back. Over the next year we bought two more
struggling banks from the FDIC: First Federal of Santa Monica and
LaJolla Bank, both through competitive bidding. Combined we had over 70
branches and had built a robust lending business, especially for small
and medium-sized businesses. As chairman of OneWest, I met with
hundreds of business people from all walks of life who were seeking
loans to grow their businesses and prosper.
Like many banks at that time, IndyMac and its reverse mortgage
division, Financial Freedom, were unstable due to the large amount of
distressed credit mortgages in its portfolios. When we bought IndyMac,
these ``legacy loans'' were included in the purchase. The
responsibility landed on me to clean up the mess that we inherited. We
worked diligently to help hardworking homeowners remain in their homes
through modifications, wherever possible. Ultimately, OneWest extended
over 100,000 loan modifications to delinquent borrowers to try and help
them out of a bad situation.
I am proud of the fact that we continued with the loan
modifications started at IndyMac under the leadership of the FDIC.
However, the FDIC loan modification program did not work for everyone.
When the FDIC took over IndyMac, they estimated that more than half of
the foreclosures would not meet their test for a loan modification. And
they demanded many policy conditions: extend assistance to sympathetic
borrowers by establishing affordable and sustainable payments by
borrowers, increase net present value of cash flows to the owner of the
loan, and stabilize housing markets. My group had to adhere to
servicing agreements which limited our ability to modify loans that
could have helped borrowers.
In the press it has been said that I ran a ``foreclosure machine.''
This is not true. On the contrary, I was committed to loan
modifications intended to stop foreclosures. I ran a ``Loan
Modification Machine.'' Whenever we could do loan modifications we did
them, but many times, the FDIC, FNMA, FHLMC, and bank trustees imposed
strict rules governing the processing of these loans. I am proud to be
able to say that our bank was able to modify over 100,000 loans thus
allowing people the opportunity to remain in their homes.
Unfortunately, not all of the homes could be saved through these
programs, and despite my best efforts, some were sadly, subject to
foreclosure.
So strong was my concern over this, in 2010 I instructed my lawyers
to sue HSBC, as trustee of the securitized loans, to allow us to do
loan modifications on loans in trusts they controlled. We won on
summary judgment and were consequently allowed to provide more loan
modifications and keep more American families in their homes
Similarly, in 2015, when HUD issued Mortgagee Letter 2015-11, I
wrote to HUD and asked them to change the policy so that we would not
be forced to foreclose on senior citizens who were behind only small
amounts on taxes and insurance. I was so troubled by this that I
discussed it with our primary regulator, the Office of the Comptroller
of the Currency. Unfortunately, HUD did not see it my way, and we were
forced to foreclose on senior citizens even when they only owed $1. Not
complying with these HUD policies would have subjected the bank to
penalties and losses from HUD.
Despite our inability to save every home from foreclosure, I am
proud of the fact that OneWest Bank was the only one of 14 banks that
was able to complete the independent foreclosure review that was
conducted by the OCC. Every one of the 175,000 borrowers who were in
the foreclosure process during 2009 and 2010 were able to pass an
independent review of their loan. We had a very low error rate, and
independent government reviews routinely showed that we had the most
effective loan modification process of any bank.
If we had not bought IndyMac, the bank would likely have been
broken up and sold in pieces to private investors, where the outcome
for consumers could have been much bleaker.
Overall, I believe we helped many earnest and hard-working
homeowners, many who were like my grandparents, stay in their homes and
escape financial ruin.
My experience confirmed that we must identify and eliminate unwise
and burdensome policies which contribute to the disastrous outcomes
that came in the wake of the financial collapse.
Many Americans are continuing to suffer from the disastrous ripple
effects of the 2008 crisis. Faithfully ensuring this does not happen
again means supporting careful oversight of the financial system which
prioritizes the needs of everyday Americans over the wishes of
financial institutions or the Federal Government.
I have great empathy for the millions of hardworking American
families who needlessly lost their homes because the system failed
them. If confirmed as Treasury Secretary, I will work diligently and
compassionately for the American people, so that we never endure
anything like the meltdown of 2008 again.
trump campaign
I was deeply honored when Donald Trump asked me to join his
campaign as Finance Chairman. I had the opportunity to travel with him
and hear first-hand from hardworking Americans about their concerns for
the American economy. Over the last year, I visited over 50 cities in
26 States. I remember attending my first rally with him in
Indianapolis. It was an unforgettable experience. As we arrived into a
stadium packed with 20,000 people, I saw the excitement that people had
for a Trump presidency. On our trip to Flint, Michigan, I went with the
President-elect to visit the water treatment facilities and saw first-
hand the crumbling pipes and the devastation caused by lead tainted
water. We met with water engineers, and witnessed the impact it had on
that community and the families that live there. On my travels with the
President-elect, we heard the pained and heartbreaking stories of many
Americans who had lost their jobs to workers in foreign countries. We
heard the concerns of people and small businesses burdened by high
taxes--these were people who were just trying to make ends meet. In my
meetings with you over the last month you shared with me the concerns
of your constituents, like farmers who worry about the death tax wiping
out family farms, or workers who are nervous about whether their
retirement accounts will be safe.
One of the greatest reasons I was drawn to President-elect Trump's
campaign was that it was predicated on a commitment to stimulating
prosperity for Americans of all backgrounds--whether they live in
inner-city Detroit, or rural North Carolina, or the coal country of
Ohio and West Virginia, or any place in between. I share the President-
elect's goal to economically empower every citizen. We will not rest in
our quest until it is a reality.
Among President-elect Trump's signature issues is reviving trade
policies that put the American worker first. I will enforce these trade
policies that keep and protect American jobs.
We will also make America the best place for companies to do
business. Sensible regulation is a necessity for healthy markets.
However, I saw first-hand how regulatory excess can inhibit lending by
financial institutions, resulting in a lack of access to capital for
small businesses and entrepreneurs. Ben Franklin once said, ``The
business of the American people is business.'' From our earliest days,
we have always been a Nation of strivers. American businesses are the
greatest repository of ingenuity and entrepreneurial spirit in the
world. We need to unleash that power to generate jobs and create
abundance for Americans of all backgrounds. We will work diligently to
limit regulations, lower taxes on hardworking Americans and small
businesses, and get the engine of economic growth firing on all
cylinders once again.
In this age of unprecedented online attacks, we must also be
vigilant about cybersecurity. If confirmed, as Secretary of the
Treasury, I will use my expertise in technology to protect Americans'
information at the IRS and keep our financial architecture safe from
malicious attacks.
I will use the Treasury Department's Office of Terrorism and
Financial Intelligence to stop the financing of terrorism. I will
partner with other Federal agencies in our shared goal of allowing our
financial markets to operate safely and keep our citizens secure in the
knowledge that we are working for them--24/7.
If I am confirmed as Treasury Secretary, I promise I will work hard
with this committee, all members of Congress, and the administration to
put forth policies that will help American families reach and maintain
prosperity.
We will make America great again.
Thank you. I look forward to answering any questions the Committee
may have.
______
Office of Inspector General
Executive Summary
Audit of OneWest Bank's Loan Modification Program
Report No. EVAL-11-004
July 2011
Why We Did the Audit
Former FDIC Chairman Sheila Bair requested that the FDIC Office of
Inspector General (OIG) assist in reviewing allegations in a letter
dated January 10, 2011 addressed to her and other regulators,
government officials, and media outlets purportedly from a group of
OneWest Bank, FSB (OneWest) employees. The letter alleged that OneWest
executives had instructed employees to reject as many loan modification
applications as possible and created an environment that encouraged
loan modification staff to misinform borrowers about their eligibility
status, routinely shred loan modification applications, and
inappropriately deny loan modifications. The letter also stated that
the terms of the FDIC's agreement with OneWest created a financial
incentive for OneWest to foreclose rather than modify loans.
Our objectives were to determine whether evidence exists to
substantiate the allegations in the January 10, 2011 letter, and
OneWest is administering loan modifications in accordance with the Home
Affordable Modification Program (HAMP) and/or other FDIC-approved loan
modification programs adopted under the Shared Loss Agreement Between
the FDIC as Receiver for IndyMac Federal Bank, FSB and OneWest Bank,
FSB dated March 19, 2009 (SLA).
Background
On July 11, 2008, the Office of Thrift Supervision (OTS) closed IndyMac
Bank, FSB, Pasadena, CA, and named the FDIC conservator. Substantially
all of IndyMac Bank's assets transferred to IndyMac Federal Bank, FSB,
which the FDIC operated to maximize the value of the institution for a
future sale and to maintain banking services in the communities
formerly served by IndyMac Bank, FSB. On March 19, 2009, the FDIC
completed the sale of IndyMac Federal Bank, FSB, to OneWest, a newly
formed federal savings bank organized by IMB HoldCo LLC. OneWest
purchased more than $6 billion of deposits and approximately $20.7
billion in assets at a discount of $4.7 billion. Among the assets
OneWest purchased was $12.8 billion in single-family mortgage loans.
The FDIC and OneWest entered into the SLA on the single-family mortgage
loan portfolio. The FDIC conducts periodic reviews to monitor
compliance with the SLA and to review claims for reimbursement. The SLA
also requires OneWest to provide regular reports to enable the FDIC to
ensure compliance with the SLA and to monitor performance of the
covered assets.
Treasury initiated HAMP as part of the Making Home Affordable Program
to provide eligible borrowers the opportunity to modify their first
lien mortgage loans to make them more affordable. Under HAMP, servicers
apply a uniform loan modification process to provide eligible borrowers
with affordable and sustainable monthly payments for their first lien
mortgage loans. HAMP achieves affordability through interest rate
reduction, term extension, principal forbearance, and principal
forgiveness.
Audit Results
We did not find evidence to support the allegations in the January 10,
2011 letter, and we determined that several statements made in the
letter about OneWest officials and the loan modification process were
factually inaccurate.
OneWest paid a $4.7-billion discount for the IndyMac assets, and the
FDIC will reimburse OneWest for losses based on the full book value of
those assets, which has been viewed by some to create an incentive for
OneWest to foreclose on loans rather than modify them. In fact, OneWest
must incur cumulative losses of more than $2.5 billion before the FDIC
begins reimbursing OneWest for any losses. The FDIC competitively bid
IndyMac assets, and FDIC officials advised us that OneWest's
acquisition represented the least cost transaction to the Deposit
Insurance Fund. Further, we determined that there were compensating
controls that mitigate the risk that OneWest would pursue foreclosures
over loan modifications and ensure that OneWest pursues actions under
the SLA that minimize losses to the FDIC.
We did identify borrower communication issues that might have resulted
in borrower misunderstanding or confusion, and fueled perceptions that
OneWest favors foreclosures over loan modifications. OneWest has taken
steps to address those issues. In addition, we noted that the quality
of the IndyMac loan portfolio that OneWest acquired made it difficult
for borrowers to qualify for loan modifications and likely contributed
to the perception that OneWest denies many loan modifications.
With respect to our second objective, we determined that OneWest
administered loan modifications in accordance with HAMP. OneWest
appropriately solicited borrowers for and processed loan modifications
more than 98 percent of the time based on our review of a random sample
of 260 loans. We found four exceptions: one related to the HAMP loan
modification solicitation process, which establishes a reasonable
effort standard for soliciting borrower interest; in three instances,
OneWest incorrectly denied modifications. OneWest took corrective
action either before or as a result of this audit to address all four
cases. In addition, we noted that OneWest provides borrowers with other
alternatives to help them remain in their homes when HAMP loan
modification is not available.
Management Comments
This report makes no recommendations, so a management response was not
required. FDIC management had no comments. Also, FDIC management
provided a copy of the draft report to OneWest for its feedback.
OneWest advised management that it had no comments.
Because this report includes confidential commercial information from
OneWest, we do not intend to publicly release the report in its
entirety.
______
SENATE FINANCE COMMITTEE
STATEMENT OF INFORMATION REQUESTED
OF NOMINEE
A. BIOGRAPHICAL INFORMATION
1. Name (include any former names used): Steven Terner Mnuchin.
2. Position to which nominated: Secretary, Department of the
Treasury.
3. Date of nomination: November 30, 2016.
4. Address (list current residence, office, and mailing addresses):
5. Date and place of birth: December 21, 1962, New York, New York.
6. Marital status (include maiden name of wife or husband's name):
7. Names and ages of children:
8. Education (list secondary and higher education institutions, dates
attended, degree received, and date degree granted):
Secondary Education: Riverdale Country School, 9/1973-6/1981, high
school diploma, 6/1981.
Yale University, 9/1981-6/1985, bachelor's degree, 6/1985.
9. Employment record (list all jobs held since college, including the
title or description of job, name of employer, location of work, and
dates of employment):
Dune Capital Management LP
Chairman and CEO
450 Park Avenue
New York, NY 10022
9/2004-Present
CIT Group Inc.
Vice chairman
888 E. Walnut Street
Pasadena, CA 91101
8/2015-3/2016
OneWest Bank Group LLC
Chairman and CEO
888 E. Walnut Street
Pasadena, CA 91101
3/2009-8/2015
SFM Capital Management LP
CEO
888 Seventh Avenue
New York, NY 10106
8/2003-9/2004
ESL Investments
Vice chairman
200 Greenwich Avenue
Greenwich, CT 06830
1/2003-7/2003
Goldman Sachs Group Inc.
Partner, managing director, EVP, and CIO
85 Broad Street
New York, NY 10004
9/1985-12/2002
10. Government experience (list any advisory, consultative, honorary,
or other part-time service or positions with Federal, State, or local
governments, other than those listed above):
None.
11. Business relationships (list all positions held as an officer,
director, trustee, partner, proprietor, agent, representative, or
consultant of any corporation, company, firm, partnership, other
business enterprise, or educational or other institution):
Dune Capital Management LP, chairman and CEO
CIT Group Inc., vice chairman
OneWest Bank Group LLC, chairman and CEO
Dune Capital Management GP LLC, sole owner
OneWest Bank NA, chairman and director
CIT Bank NA, chairman and director
CIT Group Inc., director
Sears Holdings Inc., director
Steven T. Mnuchin Inc., president and sole owner
STM Partners LLC, managing member
SHM Investments LLC, management member
Steven T. Mnuchin Revocable Trust, trustee
Steven and Heather Mnuchin Foundation, trustee
Steven T. Mnuchin GST Trust, trustee
Alan G. Mnuchin GST Trust, trustee
Elaine T. Cooper Estate, co-executor
Elaine T. Cooper Foundation, trustee
The GMG 2002 Trust, trust protector
The SMG 2002 Trust, trust protector
The LFG 2002 Trust, trust protector
Graham Morris Gewirz 1999 Trust, trustee
Lillian Frances Gewirz 1999 Trust, trustee
Stella May Gewirz 1999 Trust, trustee
The Nicholas Floyd Lampert 2015 Trust, trustee
The Nina Rosa Lampert 2015 Trust, trustee
Trust U Art 6th (b) Michael Mortara, trustee
Virginia Mortara 2007 Family Trust, trustee
The Matthew Peter Mortara 2006 Trust, trustee
Virginia and Michael Mortara Foundation, trustee
Michael Mortara Insurance Trust, trustee
Mortara Family Trust, trustee
LeFrak Trust Company, director
MOCA, trustee
LAPD Foundation, trustee
UCLA Hospital, member, board
Cedars-Sinai Hospital, member, board of governors
Relativity Media, non-executive co-chairman and board member
Kmart Holdings, board member
The Milton R. and Jena M. Berlinski 2003 Life Insurance Trust,
trustee
The Michael Paul Mortara 2006 Trust, trustee
Crummey Trust fbo Matthew Peter Mortara, trustee
2503(c) Minority Trust fbo Matthew Peter Mortara, trustee
Dune Entertainment Partners LLC, chairman
StormChaser Partners LLC, chairman
SFM Capital Management LP, CEO
ESL Management, vice chairman
Goldman Sachs Group Inc., partner, managing director, EVP, and
CIO
New York Presbyterian Hospital, life trustee
Dune Capital Partners LLC, manager
Dune Capital Partners II LP, manager
Dune Capital Partners III LLC, managing member
Dune Capital Manager LLC, managing member
IMB Management Holdings GP LLC, member
SHM Partners II LLC, managing member
STM Capital LLC, managing member
IMB Holdco LLC, chairman
OneWest Foundation, director, chairman/CEO
Dune Capital International Ltd, director
The Edward S. Lampert 2012 Family Trust
Alan G. Mnuchin 2016 Insurance Trust
12. Memberships (list all memberships and offices held in
professional, fraternal, scholarly, civic, business, charitable, and
other organizations):
Sebonak Golf Club, Southampton, NY
El Dorado Golf Club, Cabo Mexico
Maravilla Club, Cabo Mexico
Riviera Golf Club, Los Angeles, CA
Jonathan Club, Los Angeles, CA
Lyford Cay Club, Nassau, Bahamas
Pacific Council on International Policy, Los Angeles, CA
Russel Trust Association, Yale University, New Haven, CT
Temple Emanuel, New York, NY
Park East Synagogue, New York, NY
Kehillat Israel, Pacific Palisades, CA
13. Political affiliations and activities:
a. List all public offices for which you have been a candidate.
None.
b. List all memberships and offices held in and services rendered
to all political parties or election committees during the last 10
years.
Finance Chairman, Trump for America, Inc.
c. Itemize all political contributions to any individual, campaign
organization, political party, political action committee, or similar
entity of $50 or more for the past 10 years.
------------------------------------------------------------------------
Transaction Date Recipient Amount Contribution Type
------------------------------------------------------------------------
06/30/2006 Maria Cantwell $1,000 Contribution to all
other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
06/14/2006 John J. Cranfey IV $1,000 Contribution to all
other political
committees except
joint fundraising
committees
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07/24/2006 Solutions America $3,000 Contribution to all
PAC other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
09/19/2006 Edward M. Lamont $2,100 Contribution to all
other political
committees except
joint fundraising
committees
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01/12/2007 Friends of $500 Contribution to all
Christine Quinn other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
02/22/2007 Mary Landrieu $2,300 Contribution to all
other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
02/01/2007 Bill Richardson $2,100 Contribution to all
other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
02/01/2007 John Edwards $2,100 Contribution to all
other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
02/14/2007 Rudolph W. $2,300 Contribution to all
Giuliani other political
committees except
joint fundraising
committees
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03/28/2007 Christopher J. $2,300 Contribution to all
Dodd other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
04/18/2007 Frank R. $1,000 Contribution to all
Lautenberg other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
06/04/2007 Barak Obama $2,300 Contribution to all
other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
07/02/2007 Dodd for President $2,300 Contribution to all
other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
07/06/2007 Friends of Jack $1,000 Contribution to all
Marnell other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
10/22/2007 Hillary Rodham $2,300 Contribution to all
Clinton other political
committees except
joint fundraising
committees
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11/13/2007 Mitt Romney $2,300 Contribution to all
other political
committees except
joint fundraising
committees
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12/21/2007 Friends of $1,000 Contribution to all
Christine Quinn other political
committees except
joint fundraising
committees
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02/25/2007 Friends of $1,000 Contribution to all
Christine Quinn other political
committees except
joint fundraising
committees
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03/31/2008 Hillary Rodham $2,300 Contribution to all
Clinton other political
committees except
joint fundraising
committees
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04/07/2008 Michael Wildes $1,900 Contribution to all
other political
committees except
joint fundraising
committees
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05/12/2009 David Yassky $1,000 Contribution to all
other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
05/12/2010 Michael Wildes $1,900 Contribution to all
other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
07/19/2010 Andrew Cuomo $5,000 Contribution to all
other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
07/12/2011 Timothy Pawlenty $1,000 Contribution to all
other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
09/01/2011 Mitt Romney $5,000 Contribution to all
other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
05/08/2012 Michael Wildes $1,900 Contribution to all
other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
06/08/2012 Republican $7,500 Recipient of joint
National fundraiser
Committee contribution
------------------------------------------------------------------------
06/08/2012 Mitt Romney $2,500 Recipient of joint
fundraiser
contribution
------------------------------------------------------------------------
09/10/2012 Republican $12,500 Recipient of joint
National fundraiser
Committee contribution
------------------------------------------------------------------------
10/10/2012 Bloom for Assembly $2,500 Contribution to all
other political
committees except
joint fundraising
committees
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10/15/2012 Prop 32 $5,000 Contribution to all
other political
committees except
joint fundraising
committees
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05/11/2013 Wendy Greuel $1,300 Contribution to all
other political
committees except
joint fundraising
committees
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02/07/2014 Hagan for Senate $1,000 Contribution to all
other political
committees except
joint fundraising
committees
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04/29/2014 Michael Wildes $1,900 Contribution to all
other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
02/10/2016 Kamala Harris $2,000 Contribution to all
other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
05/13/2016 Michael Wildes $1,900 Contribution to all
other political
committees except
joint fundraising
committees
------------------------------------------------------------------------
05/17/2016 Donald Trump $10 Contribution to all
other political
committees except
joint fundraising
committees
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06/08/2016 Republican $7,500 Recipient of joint
National fundraiser
Committee contribution
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06/30/2016 Trump Victory $425,000 Joint fundraising
contribution
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06/30/2016 NY Republican $10,000 Recipient of joint
Federal Campaign fundraiser
Committee contribution
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06/30/2016 Republican Party $10,000 Recipient of joint
of Arkansas fundraiser
contribution
------------------------------------------------------------------------
06/30/2016 Republican Party $10,000 Recipient of joint
of Virginia fundraiser
contribution
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06/30/2016 Donald Trump $2,700 Recipient of joint
fundraiser
contribution
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06/30/2016 Donald Trump $2,700 Recipient of joint
fundraiser
contribution
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06/30/2016 Republican Party $10,000 Recipient of joint
of Louisiana fundraiser
contribution
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06/30/2016 Republican $100,200 Recipient of joint
National fundraiser
Committee contribution
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06/30/2016 Republican $75,800 Recipient of joint
National fundraiser
Committee contribution
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06/30/2016 Republican $33,400 Recipient of joint
National fundraiser
Committee contribution
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06/30/2016 Republican Party $10,000 Recipient of joint
of Mississippi fundraiser
contribution
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06/30/2016 Republican Party $10,000 Recipient of joint
of West Virginia fundraiser
contribution
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07/22/2016 Team Ryan $25,000 Joint fundraising
contribution
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07/22/2016 Paul Ryan $2,700 Recipient of joint
fundraiser
contribution
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07/22/2016 Paul Ryan $2,700 Recipient of joint
fundraiser
contribution
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09/27/2016 South Carolina $10,000 Recipient of joint
Republican Party fundraiser
contribution
------------------------------------------------------------------------
09/30/2016 Tennessee $10,000 Recipient of joint
Republican fundraiser
Federal Election contribution
Account
------------------------------------------------------------------------
09/30/2016 Connecticut $10,000 Recipient of joint
Republican fundraiser
Campaign contribution
Committee
------------------------------------------------------------------------
09/30/2016 New Jersey $10,000 Recipient of joint
Republican State fundraiser
Committee contribution
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14. Honors and awards (list all scholarships, fellowships, honorary
degrees, honorary society memberships, military medals, and any other
special recognitions for outstanding service or achievement):
None.
15. Published writings (list the titles, publishers, and dates of all
books, articles, reports, or other published materials you have
written):
None.
16. Speeches (list all formal speeches you have delivered during the
past 5 years which are on topics relevant to the position for which you
have been nominated):
None.
17. Qualifications (state what, in your opinion, qualifies you to
serve in the position to which you have been nominated):
I have extensive management, technology, and investment expertise
which I will apply to my position in government. I have over 30 years
of business experience, including expertise in financial markets,
lending, banking, regulatory, entertainment, and technology.
B. FUTURE EMPLOYMENT RELATIONSHIPS
1. Will you sever all connections with your present employers,
business firms, associations, or organizations if you are confirmed by
the Senate? If not, provide details.
Yes.
2. Do you have any plans, commitments, or agreements to pursue
outside employment, with or without compensation, during your service
with the government? If so, provide details.
No.
3. Has any person or entity made a commitment or agreement to employ
your services in any capacity after you leave government service? If
so, provide details.
No.
4. If you are confirmed by the Senate, do you expect to serve out
your full term or until the next presidential election, whichever is
applicable? If not, explain.
Yes.
C. POTENTIAL CONFLICTS OF INTEREST
1. Indicate any investments, obligations, liabilities, or other
relationships which could involve potential conflicts of interest in
the position to which you have been nominated.
In connection with the nomination process, I have begun consulting
with the Office of Government Ethics and the Department of the
Treasury's designated agency ethics officials to identify any potential
conflicts of Interest. Any potential conflicts of interest will be
resolved in accordance with the terms of an ethics agreement that I
will enter into with the Department's designated agency ethics official
and that will be provided to this committee.
2. Describe any business relationship, dealing or financial
transaction which you have had during the last 10 years, whether for
yourself, on behalf of a client, or acting as an agent, that could in
any way constitute or result in a possible conflict of interest in the
position to which you have been nominated.
In connection with the nomination process, I have begun consulting
with the Office of Government Ethics and the Department of the
Treasury's designated agency ethics officials to identify any potential
conflicts of interest. Any potential conflicts of interest will be
resolved in accordance with the terms of an ethics agreement that I
will enter into with the Department's designated agency ethics official
and that will be provided to this committee.
3. Describe any activity during the past 10 years in which you have
engaged for the purpose of directly or indirectly influencing the
passage, defeat, or modification of any legislation or affecting the
administration and execution of law or public policy. Activities
performed as an employee of the Federal Government need not be listed.
None.
4. Explain how you will resolve any potential conflict of interest,
including any that may be disclosed by your responses to the above
items.
In connection with the nomination process, I have begun consulting
with the Office of Government Ethics and the Department of the
Treasury's designated agency ethics officials to identify any potential
conflicts of interest. Any potential conflicts of interest will be
resolved in accordance with the terms of an ethics agreement that I
will enter into with the Department's designated agency ethics official
and that will be provided to this committee.
5. Two copies of written opinions should be provided directly to the
Committee by the designated agency ethics officer of the agency to
which you have been nominated and by the Office of Government Ethics
concerning potential conflicts of interest or any legal impediments to
your serving in this position.
6. The following information is to be provided only by nominees to
the positions of United States Trade Representative and Deputy United
States Trade Representative:
Have you ever represented, advised, or otherwise aided a foreign
government or a foreign political organization with respect to any
international trade matter? If so, provide the name of the foreign
entity, a description of the work performed (including any work you
supervised), the time frame of the work (e.g., March to December 1995),
and the number of hours spent on the representation.
N/A.
D. LEGAL AND OTHER MATTERS
1. Have you ever been the subject of a complaint or been
investigated, disciplined, or otherwise cited for a breach of ethics
for unprofessional conduct before any court, administrative agency,
professional association, disciplinary committee, or other professional
group? If so, provide details.
None.
2. Have you ever been investigated, arrested, charged, or held by any
Federal, State, or other law enforcement authority for a violation of
any Federal, State, county, or municipal law, regulation, or ordinance,
other than a minor traffic offense? If so, provide details.
No.
3. Have you ever been involved as a party in interest in any
administrative agency proceeding or civil litigation? If so, provide
details.
Please see Attachment A.
4. Have you ever been convicted (including pleas of guilty or nolo
contendere) of any criminal violation other than a minor traffic
offense? If so, provide details.
No.
5. Please advise the committee of any additional information,
favorable or unfavorable, which you feel should be considered in
connection with your nomination.
N/A.
E. TESTIFYING BEFORE CONGRESS
1. If you are confirmed by the Senate, are you willing to appear and
testify before any duly constituted committee of the Congress on such
occasions as you may be reasonably requested to do so?
Yes.
2. If you are confirmed by the Senate, are you willing to provide
such information as is requested by such committees?
Yes.
______
ATTACHMENT A
Section D. 3. Have you ever been involved as a party in interest in any
administrative agency proceeding or civil litigation? If so, provide
details.
----------------------------------------------------------------------------------------------------------------
Caption Jurisdiction Filed Date Description
----------------------------------------------------------------------------------------------------------------
John Carrington V. Steven U.S. Ct. of App., 4th 0ctober 14, 2016 I was a named defendant in this
Mnuchin Cir. case due to my position at CIT/
OneWest Bank.
This matter involved an appeal of
the court's denial of plaintiffs'
Rule 59(e) motion (seeking to
alter the court's denial with
prejudice of plaintiffs' Rule
60(b) motion for relief) in the
state court case below (5:13-CV-
03422).
A motion to amend caption to remove
my name was filed on December 7,
2016 to reflect an earlier
(unchallenged) ruling in the state
court proceeding regarding lack of
service, which motion is pending.
----------------------------------------------------------------------------------------------------------------
U.S. Bank National HI U.S. Dist. Ct. June 8, 2016 I was a named defendant in this
Association v. Franco et case due to my position at CIT/
al. OneWest Bank.
This matter involves a contested
foreclosure.
This case was appealed and removed
to federal court from state court
case number 13-1-0627. I was
dismissed with prejudice prior to
appeal. The appeal does not affect
the dismissal.
----------------------------------------------------------------------------------------------------------------
Lipovich, Joseph v. CIT NY New York Sup. Ct. January 10, 2016 I was a named defendant in this
Group Inc., John A. Thain, case due to my position at CIT/
Ellen R. Alemany, Michael OneWest Bank.
J. Embler, Alan Frank, Plaintiff alleges that the CIT
William M. Freeman, David board of directors failed to
M. Moffett, Steven comply with Section 141(k) of the
Mnuchin, R. Delaware General Corporation Law,
which provides that a simple
majority vote of a company's
stockholders is needed to remove
directors from a company's board
of directors.
This matter was resolved by
settlement on October 12, 2016.
----------------------------------------------------------------------------------------------------------------
Rossof, Jacob v. Edward S. DE Chancery Ct. June 19, 2015 I was a named defendant in this
Lampert et al. case due to my position at Sears
Holdings Corp.
Plaintiff alleged certain Sears
officers and directors breached
their fiduciary duties in
connection with the sale of
various commercial real estate
holdings to Seritage.
Without conceding that the
allegations have any merit
whatsoever, the parties have
reached an agreement in principle
to resolve the litigation and are
in the process of preparing a
formal settlement agreement.
----------------------------------------------------------------------------------------------------------------
Ryan Flanagan v. Edward S. DE Chancery Ct. June 19, 2015 I was a named defendant in this
Lampert case due to my position at Sears
Holdings Corp.
Plaintiff alleged certain Sears
officers and directors breached
their fiduciary duties in
connection with the sale of
various commercial real estate
holdings to Seritage.
Without conceding that the
allegations have any merit
whatsoever, the parties have
reached an agreement in principle
to resolve the litigation and are
in the process of preparing a
formal settlement agreement.
----------------------------------------------------------------------------------------------------------------
Stein, Shiva v. Edward S. DE Chancery Ct. June 18, 2015 I was a named defendant in this
Lampert case due to my position at Sears
Holdings Corp.
Plaintiff alleged certain Sears
officers and directors breached
their fiduciary duties in
connection with the sale of
various commercial real estate
holdings to Seritage.
Without conceding that the
allegations have any merit
whatsoever, the parties have
reached an agreement in principle
to resolve the litigation and are
in the process of preparing a
formal settlement agreement.
----------------------------------------------------------------------------------------------------------------
Teena Colebrook v. Steven U.S. Dist. Ct., Central May 28, 2015 I was a named defendant in this
O. App et al. District, CA case due to my position at CIT/
OneWest Bank.
Plaintiff alleges ``trespass'' by
way of use of a forged instrument.
This matter was dismissed without
prejudice on June 10, 2015.
----------------------------------------------------------------------------------------------------------------
In re Sears Holdings DE Chancery Ct. May 29, 2015 I was a named defendant in this
Corporation Stockholder case due to my position at Sears
and Derivative Litigation Holdings Corp.
Plaintiff alleged certain Sears
officers and directors breached
their fiduciary duties in
connection with the sale of
various commercial real estate to
Seritage.
Without conceding that the
allegations have any merit
whatsoever, the parties have
reached an agreement in principle
to resolve the litigation and are
in the process of preparing a
formal settlement agreement.
----------------------------------------------------------------------------------------------------------------
Teena Colebrook v. Joseph Sup. Ct., San Luis April 2, 2015 I was a named defendant in this
Otting et al. Obispo County, CA case due to my position at CIT/
OneWest Bank.
Plaintiff alleges ``trespass'' and
``fraudulent claims.''
This matter was resolved by
voluntary dismissal on April 29,
2015.
----------------------------------------------------------------------------------------------------------------
Dr. Robert A. Kuzner, Jr. U.S. Dist. Ct., Dist. September 18, 2014 I was a named defendant in this
v. OneWest Bank; Joseph of MD case due to my position at CIT/
Ottin et al. OneWest Bank.
Lawsuit filed alleging 25 causes of
action ranging from conspiracy to
commit extortion, embezzlement and
banking fraud to conspiracy to
commit burglary, harassment,
stalking, theft, and murder.
This matter was dismissed without
prejudice on October 16, 2014.
----------------------------------------------------------------------------------------------------------------
Heather Mnuchin v. Steven CA Los Angeles Sup. Ct. March 6, 2014 This matter relates to my divorce
Mnuchin from my second wife.
----------------------------------------------------------------------------------------------------------------
Carrington et al. v. SC U.S. Dist. Ct. December 6, 2013 I was a named defendant in this
Mnuchin et al. case due to my position at CIT/
OneWest Bank.
Plaintiffs allege breach of
contract and RESPA violations for
alleged failure to maintain
payments on property taxes for
escrowed loan, resulting in tax
sale in which borrowers were
forced to redeem unpaid taxes and
subsequently default. The
complaint also alleges improper
denial of loan modification.
This matter has been appealed. See
case 16-2190 above.
----------------------------------------------------------------------------------------------------------------
Colebrook, Teena v. Sup. Ct, Los Angeles 0ctober 23, 2013 I was a named defendant in this
Mnuchin, Steven T.-- County, CA case due to my position at CIT/
OneWest Bank CEO OneWest Bank.
Small claims filing seeking maximum
claim of $10,000 as a party in
interest to the note and deed.
Dismissed without prejudice on
September 23, 2013.
----------------------------------------------------------------------------------------------------------------
State of New Jersey v. Middletown PTownship April 11, 2013 I was a named defendant in this
Mnuchin, Steve; OneWest PMunicipal Court, case due to my position at CIT/
Bank, FSB Monmouth County, NJ OneWest Bank.
Notice of warrant received on April
1, 2013 identifying arrest warrant
made out for Steve Mnuchin for
unanswered complaint with bail
amount set for $500. The
referenced unanswered complaint
names Steve Mnuchin and OneWest
Bank for unremediated code
violations.
This matter was resolved by
voluntary dismissal of charges
against me on July 23, 2013;
charges against OWB resolved by
fine.
----------------------------------------------------------------------------------------------------------------
Clark v. Boyle et al. CA U.S. Dist. Ct., July 6, 2012 I was a named defendant in this
North case due to my position at CIT/
OneWest Bank.
Plaintiff alleges violations of
RICO, bankruptcy fraud, unjust
enrichment, extortion, fraud,
constructive trust, intentional
infliction of emotional distress,
violation of CA Bus. and Prof.
Code 17200 et seq., violation of
CA Civil Code Section 789.3.
This matter was dismissed without
prejudice on October 1, 2014.
----------------------------------------------------------------------------------------------------------------
In re Madoff Securities U.S. Ct. of App., 2nd June 21, 2012 I was a named defendant in this
Cir. case due to my position as co-
executor of my mother's estate.
Irving H. Picard, as trustee for
debtor Bernard L. Madoff
Securities LLC, sued to avoid
fictitious profits paid by the
debtor to hundreds of customers
over the life of the Ponzi scheme
operated by Madoff. The defendant
customers moved to dismiss certain
of these avoidance claims pursuant
to 11 U.S.C. Sec. 546(e), which
shields from recovery securities-
related payments made by a
stockbroker. The U.S. District
Court for the Southern District of
New York (Rakoff, J.) agreed that
Sec. 546(e) barred the claims,
dismissed them, and certified the
dismissal as a final judgment. The
trustee appealed. This case
encompasses several consolidated
matters
U.S. Court of Appeals for the
Second Circuit affirmed judgment
of district court on December 8,
2014. Petition for writ of
certiorari by U.S. Supreme Court
denied on June 2, 2015.
----------------------------------------------------------------------------------------------------------------
Irving H. Picard, Trustee NY U.S. Dist. Ct., November 30, 2011 I was a named defendant in this
v. Estate of Elaine Cooper South case due to my position at co-
et al. executor of my mother's estate.
Defendants filed a motion for entry
of an order granting mandatory
withdrawal of the reference of the
above-captioned adversary
proceeding pursuant to 28 U.S.C.
Sec. 157(d) because allegations
and claims by Irving H. Picard, as
trustee for debtor Bernard L.
Madoff Securities LLC, in the
complaint in this action were
substantially similar to those in
another action (Picard v.
Goldstein, Adv. Pro. No. 10-04482
(BRL) (Bankr. S.D.N.Y.)) related
to the Bernard Madoff suits
initiated by Mr. Picard.
The motion was denied on August 1,
2014.
----------------------------------------------------------------------------------------------------------------
Carozza, David-Michael v. CA Los Angeles Sup. Ct. June 28, 2011 I was a named defendant in this
IndyMac Venture LLC, et case due to my position at CIT/
al. OneWest Bank.
Plaintiff voluntarily dismissed
this matter on July 18, 2011.
----------------------------------------------------------------------------------------------------------------
David-Michael Carozza et CA Los Angeles Sup. Ct. June 28, 2011 I was a named defendant in this
al. v. IndyMac Venture, case due to my position at CIT/
LLC et al. OneWest Bank.
This matter was dismissed on July
29, 2011.
----------------------------------------------------------------------------------------------------------------
Sheila Marie George v. Bankruptcy Court, December 16, 2010 I was a named defendant in this
State of Washington DBA Western District, King case due to my position at CIT/
United States Bankruptcy County, WA OneWest Bank.
Court et al. Bankruptcy-Borrower filed second
chapter 13 in December of 2010.
Sheila Marie George, Secured Party
Creditor, filed a Subpoena and
Adversary Pro Se complaint
demanding that the Defendants
produce their proof of claim
regarding the original note and
mortgage and registration
statements as proof for
inspection. Borrower alleges that
securitization is illegal.
This matter was dismissed without
prejudice on January 31, 2011.
----------------------------------------------------------------------------------------------------------------
Theodore Frank v. Robert F. U.S. Ct. of App., 7th 0ctober 1, 2010 I was a named defendant in this
Booth Trust, et al. Cir. case due to my position at Sears
Holdings Corp.
Plaintiff alleged certain
``interlocking directorships''
violated section 8 of the Clayton
Act.
Without conceding that the
allegations had any merit
whatsoever, the parties reached a
confidential settlement.
----------------------------------------------------------------------------------------------------------------
Sheila Marie George v. Bankruptcy Court, June 2, 2010 I was a named defendant in this
Phillip H. Brandt et al. Western District, King case due to my position at CIT/
County, WA OneWest Bank.
Bankruptcy-Borrower filed chapter
13 in December of 2009. Sheila
Marie George, Secured Party
Creditor, filed a Subpoena and
Adversary Pro Se complaint
demanding that the Defendants
produce their proof of claim
regarding the original note and
mortgage and registration
statements as proof for
inspection. Borrower alleges that
securitization is illegal.
This matter was dismissed without
prejudice on June 3, 2010.
----------------------------------------------------------------------------------------------------------------
Wright v. OneWest Mortgage MD Prince George's Cir. March 15, 2010 I was a named defendant in this
Ct. case due to my position at CIT/
OneWest Bank.
This matter was dismissed on
January 4, 2011.
----------------------------------------------------------------------------------------------------------------
David Morales v. Federal CA U.S. Dist. Ct., February 16, 2010 I was a named defendant in this
Deposit Insurance Central case due to my position at CIT/
Corporation et al. OneWest Bank.
It involved a Federal court action
to remove the matter from State
court.
This matter was dismissed on April
29, 2010 and remanded to State
court (the State court action was
dismissed with prejudice on
November 8, 2011).
----------------------------------------------------------------------------------------------------------------
Gross v. Crowley et al. IL U.S. Dist. Ct., September 14, 2009 I was a named defendant in this
North case due to my position at Sears
Holdings Corp.
Plaintiff alleged certain
``interlocking directorships''
violated section 8 of the Clayton
Act.
Without conceding that the
allegations had any merit
whatsoever, the parties reached a
confidential settlement.
----------------------------------------------------------------------------------------------------------------
Robert F. Booth Trust v. IL U.S. Dist. Ct., August 28, 2009 I was a named defendant in this
Crowley et al. North case due to my position at Sears
Holdings Corp.
Plaintiff alleged certain
``interlocking directorships''
violated section 8 of the Clayton
Act.
Without conceding that the
allegations had any merit
whatsoever, the parties reached a
confidential settlement.
----------------------------------------------------------------------------------------------------------------
Estate of Elaine Terner U.S. Tax Court August 7, 2009 I was a named defendant in this
Cooper, Deceased, Steven case due to my position at co-
Mnuchin, and Alan Mnuchin, executor of my mother's estate.
Executors v. Commissioner The matter was resolved by a
of Internal Revenue stipulated decision entered on
August 17, 2015.
----------------------------------------------------------------------------------------------------------------
Daniel Barry Lindsey; Barr- Western New York August 3, 2009 I was a named defendant in this
Lind Maintenance v. Chautauqua County case due to my position at Sears
Capital Contractors Inc. Supreme Court Holdings Corp.
et al. Plaintiff alleged that Sears
breached certain contracts and/or
defrauded a vendor.
Without conceding that the
allegations had any merit
whatsoever, the parties reached a
confidential settlement.
----------------------------------------------------------------------------------------------------------------
Jenkins v. Bair et al. FL U.S. Dist. Ct., January 9, 2009 I was a named defendant in this
South case due to my position at CIT/
OneWest Bank.
Plaintiff alleged violations of
RICO, the Fair Debt Collection
Practices Act, and ``common law
malicious foreclosure.''
This matter was dismissed with
prejudice on October 30, 2009.
----------------------------------------------------------------------------------------------------------------
Mercedes Benz Financial v. FL Palm Beach 15th May 1, 2006 This matter relates to my position
Steve Mnuchin Judicial Cir. as co-Pexecutor of my mother's
estate.
----------------------------------------------------------------------------------------------------------------
In re: Elaine Terner Cooper FL Palm Beach 15th September 8, 2005 This matter relates to my position
Judicial Cir. as co-Pexecutor of my mother's
estate.
----------------------------------------------------------------------------------------------------------------
M & C C of Baltimore v. MD Baltimore City Cir. May 7, 2004 At this time, I do not have
Bernard R. Fellerman et Ct. information regarding this matter.
al. Additional details will be
provided as they become available.
----------------------------------------------------------------------------------------------------------------
Mnuchin, Steven T. v. NY New York County December 22, 1998 This matter relates to my divorce
Mnuchin, Kathryn M. Clerk Civil Index from my first wife.
----------------------------------------------------------------------------------------------------------------
______
Questions Submitted for the Record to Steven Terner Mnuchin
Questions Submitted by Hon. Orrin G. Hatch
trade: financial services data
Question. Among my concerns with the Trans-Pacific Partnership, or
TPP, agreement is the fact that it failed to prohibit local data
storage requirements in the financial services sector. This outcome was
inconsistent with the clear direction on data flows that Congress set
out in TPA. These types of localization requirements are a serious
problem for U.S. financial services companies, who often face pressure
to store their data overseas. This increases costs, reduces data
security, and in some cases, makes entering markets unfeasible. In
short, these measures mean financial services jobs located in the
United States may have to be moved overseas to meet foreign data
localization requirements.
I wonder whether you can give me your assurance that, if confirmed,
you will combat data localization measures for all industry sectors
wherever they appear, and not continue the past administration's
practice of excluding financial services from those protections or from
future trade negotiations.
Answer. I will work with you and your staff to ensure that the
versions of future trade agreements include financial services where
appropriate.
gses
Question. As former Treasury Secretary Hank Paulson has stated, the
conservatorship of mortgage giants Fannie and Freddie, also known as
Government Sponsored Enterprises, or GSEs, were to be a ``time out,''
while the government decides how to restructure the GSEs. Fannie and
Freddie went into conservatorship in 2008 which means that the ``time
out'' has lasted for more than 8 full years.
Numerous commentators, including analysts at the Federal Reserve,
have commented on a need to finally get to restructuring Fannie and
Freddie. For example, in a March 2015 Staff Report from the Federal
Reserve Bank of New York, analysts wrote that ``. . . there appears to
be broad consensus that Fannie Mae and Freddie Mac should be replaced
by a private system--perhaps augmented by public reinsurance against
extreme tail outcomes. . . .''
You also recently echoed the need to get to finality on
restructuring Fannie and Freddie, and I'd expect you, as nominee for
Treasury Secretary, to be thinking about such issues. The Obama
administration has, for the past 8 years, shared the view that Congress
should pass legislation to reform our housing-finance system. Do you
agree with the views of many that the ``time out'' on the GSEs ought to
end, and Fannie and Freddie need to somehow be restructured or ended?
Answer. I agree that the United States needs a comprehensive
approach to its housing finance policy. With Fannie Mae and Freddie Mac
both in conservatorship, it is difficult to articulate their long-term
role within our housing finance policy. Eight years passed since they
entered conservatorship and there has been a significant recovery of
housing prices across the country. So that lends itself to be a good
time, in my view, to address the desired future state we seek for
housing finance in our country.
I look forward to exploring with Congress and stakeholders across
the public and private sector solutions to this important problem.
role of united states in oecd
Question. The past several years have seen a focus by the United
States and other countries in the OECD to address tax base erosion and
profit shifting, or BEPS. Unfortunately, soon after the conclusion of a
series of agreed-upon actions to address BEPS, some countries decided
to go their own way and take actions that were inconsistent with the
agreed-upon actions. Given this, what role, if any, should the United
States continue to play at the OECD?
Answer. The U.S. Representative to the OECD must vigorously advance
the United States' agenda. As a founding member of the organization,
the United States should take a leading role in shaping the agenda of
the organization. In instances where other nations choose to take
actions inconsistent with agreed upon actions, the United States should
act in accordance with our best interests.
treasury oversight of customs revenue functions
Question. When the legacy agency to U.S. Customs and Border
Protection (CBP) was transferred from the Treasury to the Department of
Homeland Security (DHS) in 2002, Treasury retained oversight over the
Customs revenue functions. A recent report by the Treasury's Office of
Inspector General, however, has determined that Treasury is not
providing proper oversight of the Customs revenue functions.
Do I have your commitment that you will work to ensure that
Treasury provides the proper oversight of Customs revenue functions of
CBP?
Answer. I will work with you, Mr. Chairman, to ensure that proper
oversight occurs of the Customs revenue function.
increasing tariffs
Question. Until recently, I have never heard so much discussion of
raising tariffs. I understand and support the desire to improve U.S.
trade, but higher tariffs are higher taxes. If we raise tariffs, we
have to understand we are taxing American families.
With that in mind, in what situations do you think it is
appropriate to raise tariffs?
Answer. Congress has created and codified a range of tools that are
available to address unfair trade practices and cheating, and certain
tariffs may be appropriate. President Trump has said that our trade
policy will ensure that American companies and American workers should
benefit.
retirement policy
Question. Last year the Finance Committee reported out a bi-
partisan retirement reform bill, on a 26 to 0 vote in fact, that
included reforms such as additional incentives for small businesses
that set up retirement plans, authorization for employers to join so-
called ``multiple employer plans'' so that they can join forces to
share the costs of offering a plan, and legislation making it easier
for employers to provide, and for employees to purchase, retirement
annuities in their 401(k)-type plans.
I don't know whether you have had a chance to focus on retirement
reform yet, but it has been a priority with the committee for quite
some time and, as you can see, has very strong support.
Can you assure me that the Treasury Department will work with the
Finance Committee in the new Congress to enact retirement reform?
Answer. Multiemployer plans in many cases are appropriate such that
they can join forces and share costs. I look forward to working with
you and your staff on this issue.
irs taxpayer service and cybersecurity
Question. The IRS has faced significant problems over the past
several years in providing quality taxpayer service and protecting
taxpayer information from cybercriminals. What actions do you think the
agency needs to take to increase quality taxpayer services and prevent
cybercriminals from accessing taxpayer information and engaging in
stolen identity refund fraud?
Answer. I agree that the IRS can be more effective at providing
taxpayer service and protecting taxpayer information. Technology should
be used to improve the accuracy and security of tax administration. If
confirmed, I look forward to working closely with the IRS Commissioner
and other Federal officials to achieve this goal.
currency analysis and reporting by treasury and the role of congress
Question. In order to strengthen the Department of the Treasury's
toolbox for addressing international exchange rate issues, the Congress
passed the Trade Facilitation and Trade Enforcement Act--also known as
the Customs bill--last year.
This Act expanded the Department's currency analysis and reporting
requirements; created a bipartisan advisory committee on international
exchange rate policies; and requires enhanced engagement with and, when
appropriate, remedial actions against countries of chief concern.
Do you agree that in order to address international exchange rate
concerns successfully, the Congress and the administration must work
together and within the frameworks of the existing tools that have been
authorized?
Answer. I agree that it is important for Congress and the
administration to work together, utilizing the tools that are
authorized by law.
red tape
Question. Our current system of regulation and endless red tape has
placed many American businesses in a stranglehold, struggling to keep
the lights on. Even public investment in infrastructure, as the Obama
administration found when it was seeking ``shovel ready'' projects but
struggled to find them, faces regulatory and permitting obstacles that
simply don't make sense.
Writing on a need for infrastructure investment in the country, for
example, liberal economist and advisor to Democratic administrations
Larry Summers recently asked the following question: ``How, we ask,
could our society have regressed to the point where a bridge that could
be built in less than a year one century ago takes five times as long
to repair today?'' He also wrote that: ``Progressive advocates of more
investment should compromise with conservative sceptics and, in the
context of increased spending, accept regulatory streamlining, as well
as requirements that projects undergo cost-benefit analysis.''
As the principal economic advisor to the President, how would you
ensure our businesses and those in charge of public infrastructure
projects are given the opportunity not just to survive, but to prosper
and therefore contribute to our economic growth?
Answer. Mr. Chairman, I concur with your observations concerning
the need for government to operate more efficiently to serve the public
needs. In areas such as our infrastructure plans, implementing viable
programs that can be managed effectively but without excessive
regulation and bureaucracy is critical.
pass-through vs. individual rates
Question. President Trump campaigned on lowering both the corporate
income tax rate and the rate imposed on pass-through business income to
15 percent. Some concerns have been raised about ``gaming the system''
by high-income individuals to classify income that otherwise would be
subject to individual income tax rates as pass-through business income
subject to the lower 15 percent rate. What are your thoughts on this
issue and the concern raised, and do you believe there are ways to
address such concerns while maintaining the lower tax rate for pass-
through business income?
Answer. We will work with Congress to make sure that the language
prevents high income individuals from gaming the system and using pass-
throughs. While at the same time we will work with Congress to make
sure that pass-throughs have the benefit of the business tax.
currency and international forums
Question. I certainly understand concerns regarding international
exchange rate policies. However, I believe that it will be more
effective to address these issues through multilateral and long-term
solutions than through unilateral and short-term actions.
As such, I have long supported the Department of the Treasury's
efforts, under both Republican and Democratic administrations, to
address these issues at the International Monetary Fund, the G20, and
the G7, and through discussions with countries of chief concern.
Do you agree that the Department should continue to work within
these and other forums to seek multilateral and long-term solutions to
these concerns?
Answer. I fully support the objective of taking effective actions,
consistent with our international obligations, to provide a level
playing field for American workers and firms. We will address the issue
of currency manipulation as an unfair trade practice and will work with
the International Monetary Fund, the G7, the G20, and with major
trading partners.
intellectual property rights in trade
Question. About a year ago, President Obama signed the Trade
Facilitation and Trade Enforcement Act of 2015 (Pub. L. 114-125),
commonly referred to as the Customs bill, into law. The Customs bill
originated out of this committee and contained many important
provisions regarding the enforcement of intellectual property rights.
Some of these statutes require U.S. Customs and Border Protection (CBP)
to promulgate regulations. As the Secretary of the Treasury, you will
have the signing authority over these regulations.
Do I have your commitment to ensure that these regulations adhere
to Congress's intent?
Answer. If confirmed, I intend to fully implement the regulations,
consistent with its congressional intent.
estate tax
Question. President Trump has called for the repeal of the estate
tax and for capital gains held until death to be taxable, with the
first $10 million tax free. How do you respond to those who argue that
not only should the estate tax not be repealed, but in fact it should
be expanded through a higher tax rate and lower exemption amounts?
Answer. The administration's goal in eliminating the estate tax is
to protect small and medium-sized businesses and family farms. We look
forward to working with Congress on this issue as part of overall tax
reform.
fsoc
Question. The so-called ``Dodd Frank'' Act established a Financial
Stability Oversight Council--called the FSOC (FSOC).
One notion behind the FSOC was to have regulators talk to each
other. Prior to the financial crisis, financial regulators operated in
silos and failed miserably in their oversight and regulation of the
financial system.
Beyond that, the FSOC was set up with noble goals, such as ending
too big to fail and responding to emerging threats to ``financial
stability,'' even though the FSOC has no meaningful measure of
stability.
Unfortunately, the FSOC has been run under the Obama administration
as an opaque roving regulator. Moreover, by its very construction, it
is unlikely that the FSOC would ever identify or respond in any
meaningful way if monetary or fiscal policy turned out to threaten
financial stability.
Indeed, during the debt-limit standoff in 2011, the FSOC failed the
U.S. people by withholding information from Congress.
You will, if confirmed, chair the FSOC.
If you become chairman, would you continue the FSOC's existing
practices of essentially acting as an opaque roving regulator?
Answer. I very much look forward to serving as Chair of the FSOC
and working with its group of leaders of important and largely
independent regulatory bodies. Having a common forum for key financial
regulators to meet, share information and address financial sector
industry issues is inherently valuable. If confirmed, I will not
continue, as you suggest, the FSOC's existing practice of acting as an
opaque regulator.
treasury compliance with administrative law
Question. There has been an unfortunate trend in recent decades
suggesting that tax regulations are somehow not subject to the normal
requirements of administrative law.
That trend has suggested that somehow tax regulations and other
rules promulgated by the IRS are not subject to the same notice and
comment period as other regulations by other Federal agencies, that
they are not subject to the same cost-benefit analysis as other Federal
regulations, that they are not subject to the same OMB Office of
Regulatory Affairs Analysis as other Federal regulations, and that they
are not subject to the same Congressional Review Act requirements as
other Federal agencies.
The Supreme Court, in its 2011 Mayo decision, and the Tax Court, in
its 2015 Altera decision, instructed the IRS that the IRS is not exempt
from administrative law requirements. The IRS is subject to the same
administrative law requirements as any other Federal agency.
Can you assure me that you will make sure that IRS regulations,
rules, and guidance comply with administrative law requirements?
Answer. If confirmed, I will ensure that the Treasury follows the
requirements of administrative law, where applicable.
transparency and debt limit
Question. The statutory Federal debt limit has been suspended until
March of this year. Once we near the debt limit, Treasury has some
mechanisms it can use, called ``extraordinary measures'' even though
they have become fairly ordinary, to extend the time it takes to hit
the debt limit beyond March. After the extraordinary measures are used
up, either the limit is raised or the U.S. would default on some
obligations.
During a debt-limit impasse in 2011, Treasury and the Federal
Reserve formed contingency plans that included prioritization of
payments in the event that Treasury exhausted its borrowing authority.
Since July of 2011, I repeatedly asked Treasury and Federal Reserve
officials for their plans, only to be told that there were no plans, or
that Treasury and the Fed had ideas, but not really plans. Recently,
however, transcripts from a special meeting of the Fed's Federal Open
Market Committee revealed clearly that the plans I have been requesting
were, in fact, formulated. That, of course, means that the Fed and
Treasury officials in the Obama administration withheld information
from Congress and the American people about the Nation's finances.
If asked by any member of Congress about any plans formulated by
the Federal Government to handle our Nation's finances, do you pledge
to be responsive to Congress and the American people and not withhold
information?
Answer. As I have stated, and as has been the position of all prior
Secretaries of the Treasury, honoring the full faith and credit of our
outstanding debt is a critical commitment.
I will work with your office to review the manner of transparency
provided by the Department surrounding this topic, including the
implications of invoking extraordinary measures.
treasury office of state and local finance
Question. In April of 2014, Treasury established, without
notification or discussion with the then-ranking member of the Senate
Finance Committee which has the responsibility of oversight of
Treasury, a new Office of State and Local Finance. That Office has
engaged many of its activities in recent years to lobbying Congress for
bankruptcy authority for Puerto Rico, including what in my view has
been highly politicized rhetoric concerning ``austerity'' versus
creditor ``haircuts,'' where many creditors happen to be innocent
residents of Puerto Rico who purchased bonds issued by numerous
component units of the Puerto Rico Government.
That Office was also provided with authority to provide ``technical
assistance'' to Puerto Rico, and has recently tried to expand that
authority, through requests to congressional appropriators, to include
authority for Treasury to provide technical assistance also to States
or municipalities. One risk of such an extension would be perceptions
that could be created that somehow Treasury's Office of State and Local
Finance would be the touchpoint in the Federal Government for a
teetering State or locality to lobby for a federally backed bailout.
The risk is especially pronounced given that the Office of State and
Local Finance at Treasury has not been responsive to my staff's
repeated requests for briefings to provide transparency with respect to
whatever have been the Office's ``technical assistance'' efforts in
Puerto Rico and why at least one Treasury official has signed
confidentiality agreements with component units of the Puerto Rico
Government, including a bond-issuing unit. Numerous troubling press
reports suggest that Treasury officials have engaged in activities that
may be more political than what Congress would reasonably expect to be
``technical'' assistance.
Will you review the Office of State and Local Finance to determine
whether it is necessary for Treasury to have such an office?
Answer. I will be pleased to look into the Office of State and
Local Finance and evaluate both its focus and effectiveness as you
suggest.
Question. Will you ensure that Treasury officials provide my staff
with a briefing, with verifiable data on technical-assistance
activities, on technical assistance that Treasury has performed for
Puerto Rico?
Answer. PROMESA was an important bipartisan piece of legislation to
provide for both short and long term solutions to the financial
struggles of Puerto Rico. As you know, since it has been enacted, an
independent board has been appointed to review and validate the
feasibility of finance plans of the Government of Puerto Rico. I will
provide your staff with a briefing as you've requested.
treasury commitments in international forums
Question. Treasury officials frequently meet in international
forums, such as the G7, G20, IMF, OECD, Financial Stability Board
(FSB), and multilateral development banks. Of course, it is important
that the United States provide economic and financial leadership and
engagement internationally. It is also important, I believe, for the
United States to stand against unelected international bureaucracies
that promote policies to enlarge and enhance their organizations or
promote policies that do not promote the well-being of U.S. workers and
taxpayers.
The Obama administration, including the Treasury Secretary, engaged
in international ``agreements,'' at times with no substantive
discussion with me as I served as either ranking member or chairman of
the Finance Committee with responsibilities for oversight of Treasury
activities. For example, the Obama administration committed the United
States to participate in a ``New Arrangements to Borrow'' at the IMF.
That ``new arrangement,'' which was agreed upon by unelected
representative of G20 countries, increased resources available to the
IMF by up to $500 billion, thereby tripling total pre-crisis lending or
bailout resources of the IMF. The ``arrangement,'' promoted by Obama
administration officials, including Treasury officials, without input
from many of us in Congress, was subsequently presented to Congress as
some sort of international ``commitment,'' even though I had committed
to nothing.
The IMF, subsequent to the initial commitments by unelected G20
officials, notably broke its own rules to bail out Greece, even when
the IMF was aware of the possibility that Greece would then require yet
more bailouts--that is, that the IMF was making a bad loan, part of
which comes from resources provided by U.S. taxpayers. U.S.
representatives at the IMF in the Obama administration did not block
the rule breaking.
Do I have your commitment that you will closely examine the extent
to which U.S. resources placed in international institutions such as
the IMF, OECD, and elsewhere are serving the best interests of U.S.
workers and taxpayers?
Answer. The administration will ensure that U.S. resources placed
in international institutions such as the IMF and multilateral
development banks are used to promote policies consistent with the
objectives of the United States to the greatest extent possible.
retirement savings
Question. Treasury officials, acting on an executive order from
President Obama, created a scheme called myRA for people who don't have
access to employer-
sponsored retirement savings plans. It is my understanding that the
scheme has received relatively few savers. The scheme was established
by the Obama administration in lieu of working with Congress to help
Americans save for retirement. That was unfortunate, in my view, since
I have solid proposals with bipartisan backing to do just that.
In establishing the myRA scheme, Treasury officials used a
permanent, indefinite appropriation to the Treasury that Congress
provided to provide administrative ease for ordinary, but variable,
costs that the government would incur for things like tax collection.
Specifically, the appropriation for ``financial agents'' allows
Treasury to hire private-sector firms to provide services on behalf of
the Treasury. It is my federally sponsored saving scheme.
In addition to a permanent, indefinite appropriation for Treasury
to retain financial agents, Treasury has a permanent, indefinite
appropriation to retain ``fiscal agents,'' with the Federal Reserve
(Fed) being a principal example. Through this appropriation, certain
services--such as assistance in aggregating tax receipts and processing
payments--provided by the Fed are paid for by Treasury. The Obama
administration may have misused funds from the permanent, indefinite
appropriation for fiscal agents by compensating the Federal Reserve to
advertise that myRA scheme that the administration unilaterally decided
upon. I write the word ``may,'' because, while I have asked for copies
of fiscal agency agreements between the Treasury and Fed, thus far,
neither the Treasury nor the Fed has been willing to provide them.
Will you commit to examining the myRA savings scheme that was
unilaterally established by the Obama administration, to determine
whether it is an efficient use of taxpayer resources and whether it
helps American workers to save?
Answer. Yes, I look forward to working with your office and
reviewing the myRA savings scheme.
Question. Will you commit to providing copies of fiscal agency
agreements between Treasury and the Federal Reserve?
Answer. If confirmed, I will provide you and your staff copies of
such agreements.
debt contingency plans
Question. Since July of 2011, I have asked Treasury officials in
the Obama administration and Chairs Bernanke and Yellen of the Federal
Reserve Board for copies of contingency plans that Treasury and the Fed
constructed during the debt-limit impasse of 2011 to prioritize Federal
payments in the event that Treasury ran out of an ability to borrow
because of the statutory debt limit and had insufficient cash to
service all incoming due obligations.
Despite my repeated request for the contingency plans to prioritize
payments developed by Treasury officials in the Obama administration
and officials at the Federal Reserve, and my oversight responsibilities
with respect to Treasury and U.S. debt obligations, I have not received
copies of the plans or briefings on the plans. At times, those
officials denied that there were contingency plans, or obfuscated on
the meaning of the word ``plan,'' at the expense of necessary
transparency in government. Upon the Federal Reserve's release, more
than 5 years after the fact, of transcripts of a special conference-
call meeting on contingency plans held by the Fed's Federal Open Market
Committee, it is readily apparent that detailed contingency plans that
I have been asking for since July of 2011 were in fact developed. To
date, I have not seen or been briefed on the plans.
That is, Treasury officials in the Obama administration and
officials at the Federal Reserve have withheld information from
Congress that I have been requesting from as far back as July of 2011.
In addition and as testimony to the opaque nature of the Financial
Stability Oversight Council (FSOC), I will note that I had asked every
voting member of the FSOC in 2011 for information they may have had
with respect to the prioritization contingency plans developed by
Treasury officials in the Obama administration and by officials at the
Federal Reserve. I have yet to receive the plans or a briefing on the
plans.
Will you commit to working with my staff to uncover those plans?
Answer. I understand your question and concern and would be pleased
to review this matter with you.
Question. Mr. Mnuchin, several of my Democratic colleagues
described repeal of the Affordable Care Act or ObamaCare as a tax
increase on middle- and lower-
income taxpayers. I attach a distribution analysis from the Joint
Committee on Taxation, Congress' non-partisan tax legislation
scorekeeper, dated May 4, 2010. I ask you to review the tables.
Distributional Effects of a Proposal to Increase the Hospital Insurance (HI) Tax on Certain High-Income Individuals and Impose a Medicare Tax on
Certain Unearned Income as Included in H.R. 4872, the ``Reconciliation Act of 2010,'' as Passed by the House in Combination With H.R. 3590, the
``Patient Protection and Affordable Care Act (PPACA),'' as Enacted \1\
Calendar Year 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGE IN FEDERAL FEDERAL TAXES \3\ FEDERAL TAXES \3\ AVERAGE TAX RATE \4\
TAXES \3\ UNDER PRESENT LAW UNDER PROPOSAL ---------------------
------------------------------------------------------------------ Present Proposal
INCOME CATEGORY \2\ Law ----------
Millions Percent Billions Percent Billions Percent -----------
Percent Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................................... $1 \6\ $10 0.4% $10 0.3% 7.6% 7.6%
$10,000 to $20,000.............................................. $1 \6\ $18 0.6% $18 0.6% 4.8% 4.8%
$20,000 to $30,000.............................................. $2 \6\ $48 1.7% $48 1.7% 10.3% 10.3%
$30,000 to $40,000.............................................. $2 \6\ $81 2.9% $81 2.8% 13.8% 13.8%
$40,000 to $50,000.............................................. $1 \6\ $103 3.6% $103 3.6% 14.5% 14.5%
$50,000 to $75,000.............................................. $13 \6\ $299 10.5% $299 10.4% 16.2% 16.2%
$75,000 to $100,000............................................. $11 \6\ $318 11.2% $318 11.1% 18.1% 18.1%
$100,000 to $200,000............................................ $163 \6\ $812 28.6% $812 28.3% 22.5% 22.5%
$200,000 to $500,000............................................ $6,230 1.3% $484 17.0% $490 17.1% 27.4% 27.9%
$500,000 to $1,000,000.......................................... $5,745 3.1% $186 6.6% $192 6.7% 29.8% 31.0%
$1,000,000 and over............................................. $17,975 3.7% $479 16.9% $497 17.3% 29.8% 31.7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total, All Taxpayers........................................ $30,145 1.1% $2,838 100.0% $2,868 100.0% 21.1% 21.4%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Joint Committee on Taxation.
Detail may not add to total due to rounding.
------------------------------
\1\ The proposal would increase the HI tax by 0.9 percentage points on earnings in excess of $200,000 ($250,000 for married taxpayers filing a joint
return). Also, the proposal would impose a 3.8% tax on the investment income of taxpayers with AGI in excess of $200,000 ($250,000). The income
thresholds are not indexed for inflation. The analysis is relative to present law before the enactment of PPACA.
\2\ The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: (1) tax-exempt interest, (2) employer
contributions for health plans and life insurance, (3) employer share of FICA tax, (4) worker's compensation, (5) nontaxable Social Security benefits,
(6) insurance value of Medicare benefits, (7) alternative minimum tax preference items, and (8) excluded income of U.S. citizens living abroad.
Categories are measured at 2009 levels.
\3\ Federal taxes are equal to individual income tax (including the outlay portion of refundable credits), employment tax (attributed to employees), and
excise taxes (attributed to consumers). Corporate income tax is not included due to uncertainty concerning the incidence of the tax. Individuals who
are dependents of other taxpayers and taxpayers with negative income are excluded from the analysis.
\4\ The average tax rate is equal to Federal taxes described in footnote 3 divided by income described in footnote 2.
\5\ Less than $500,000.
\6\ Less than 0.05%.
Distributional Effects of a Proposal to Increase the Hospital Insurance (HI) Tax on Certain High-Income Individuals and Impose a Medicare Tax on
Certain Unearned Income as Included in H.R. 4872, the ``Reconciliation Act of 2010,'' as Passed by the House in Combination With H.R. 3590, the
``Patient Protection and Affordable Care Act (PPACA),'' as Enacted \1\
Calendar Year 2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGE IN FEDERAL FEDERAL TAXES \3\ FEDERAL TAXES \3\ AVERAGE TAX RATE \4\
TAXES \3\ UNDER PRESENT LAW UNDER PROPOSAL ---------------------
------------------------------------------------------------------ Present Proposal
INCOME CATEGORY \2\ Law ----------
Millions Percent Billions Percent Billions Percent -----------
Percent Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................................... \5\ \6\ $10 0.3% $10 0.3% 7.3% 7.3%
$10,000 to $20,000.............................................. $1 \6\ $19 0.6% $19 0.6% 4.8% 4.8%
$20,000 to $30,000.............................................. \5\ \6\ $52 1.7% $52 1.7% 10.4% 10.4%
$30,000 to $40,000.............................................. $4 \6\ $88 2.8% $88 2.8% 13.9% 13.9%
$40,000 to $50,000.............................................. \5\ \6\ $111 3.6% $111 3.5% 14.5% 14.5%
$50,000 to $75,000.............................................. $15 \6\ $325 10.5% $325 10.3% 16.2% 16.2%
$75,000 to $100,000............................................. $12 \6\ $346 11.1% $346 11.0% 18.0% 18.0%
$100,000 to $200,000............................................ $403 \6\ $887 28.5% $888 28.2% 22.6% 22.6%
$200,000 to $500,000............................................ $7,492 1.4% $535 17.2% $543 17.3% 27.7% 28.2%
$500,000 to $1,000,000.......................................... $6,346 3.1% $205 6.6% $211 6.7% 29.9% 31.2%
$1,000,000 and over............................................. $19,951 3.8% $531 17.1% $551 17.5% 29.8% 31.7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total, All Taxpayers........................................ $34,224 1.1% $3,109 100.0% $3,144 100.0% 21.2% 21.5%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Joint Committee on Taxation.
Detail may not add to total due to rounding.
------------------------------
\1\ The proposal would increase the HI tax by 0.9 percentage points on earnings in exess of $200,000 ($250,000 for married taxpayers filing a joint
return). Also, the proposal would impose a 3.8% tax on the investment income of taxpayers with AGI in exess of $200,000 ($250,000). The income
thresholds are not indexed for inflation. The analysis is relative to present law before the enactment of PPACA.
\2\ The income concept used to place tax returns into income categories is adjusted gross Income (AGI) plus: (1) tax-exempt interest, (2) employer
contributions for health plans and life insurance, (3) employer share of FICA tax, (4) worker's compensation, (5) nontaxable Social Security benefits,
(6) insurance value of Medicare benefits, (7) alternative minimum tax preference items, and (8) excluded income of U.S. citizens living abroad.
Categories are measured at 2009 levels.
\3\ Federal taxes are equal to individual income tax (including the outlay portion of refundable credits), employment tax (attributed to employees), and
excise taxes (attributed to consumers). Corporate income tax is not included due to uncertainty concerning the incidence of the tax. Individuals who
are dependents of other taxpayers and taxpayers with negative income are excluded from the analysis.
\4\ The average tax rate is equal to Federal taxes described in footnote 3 divided by income described in footnote 2.
\5\ Less than $500,000.
\6\ Less than 0.05%.
Distributional Effects of a Proposal to Increase the Hospital Insurance (HI) Tax on Certain High-Income Individuals and Impose a Medicare Tax on
Certain Unearned Income as Included in H.R. 4872, the ``Reconciliation Act of 2010,'' as Passed by the House in Combination With H.R. 3590, the
``Patient Protection and Affordable Care Act (PPACA),'' as Enacted \1\
Calendar Year 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGE IN FEDERAL FEDERAL TAXES \3\ FEDERAL TAXES \3\ AVERAGE TAX RATE \4\
TAXES \3\ UNDER PRESENT LAW UNDER PROPOSAL ---------------------
------------------------------------------------------------------ Present Proposal
INCOME CATEGORY \2\ Law ----------
Millions Percent Billions Percent Billions Percent -----------
Percent Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................................... \5\ \6\ $11 0.3% $11 0.3% 7.0% 7.0%
$10,000 to $20,000.............................................. $1 \6\ $21 0.6% $21 0.6% 4.8% 4.8%
$20,000 to $30,000.............................................. \5\ \6\ $57 1.7% $57 1.7% 10.4% 10.4%
$30,000 to $40,000.............................................. $4 \6\ $95 2.8% $95 2.8% 14.0% 14.0%
$40,000 to $50,000.............................................. $2 \6\ $120 3.5% $120 3.5% 14.5% 14.5%
$50,000 to $75,000.............................................. $15 \6\ $352 10.4% $352 10.3% 16.1% 16.1%
$75,000 to $100,000............................................. $18 \6\ $377 11.1% $377 11.0% 17.9% 17.9%
$100,000 to $200,000............................................ $424 \6\ $966 28.5% $966 28.2% 22.6% 22.6%
$200,000 to $500,000............................................ $8,623 1.5% $589 17.3% $597 17.4% 27.9% 28.5%
$500,000 to $1,000,000.......................................... $6,824 3.0% $224 6.6% $231 6.7% 30.0% 31.2%
$1,000,000 and over............................................. $21,695 3.7% $583 17.2% $604 17.6% 29.8% 31.8%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total, All Taxpayers........................................ $37,606 1.1% $3,393 100.0% $3,431 100.0% 21.2% 21.5%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Joint Committee on Taxation.
Detail may not add to total due to rounding.
------------------------------
\1\ The proposal would increase the HI tax by 0.9 percentage points on earnings in exess of $200,000 ($250,000 for married taxpayers filing a joint
return). Also, the proposal would impose a 3.8% tax on the investment income of taxpayers with AGI in excess of $200,000 ($250,000). The income
thresholds are not indexed for inflation. The analysis is relative to present law before the enactment of PPACA.
\2\ The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: (1) tax-exempt interest, (2) employer
contributions for health plans and life insurance, (3) employer share of FICA tax, (4) worker's compensation, (5) nontaxable Social Security benefits,
(6) insurance value of Medicare benefits, (7) alternative minimum tax preference items, and (8) exduded income of U.S. citizens living abroad.
Categories are measured at 2009 levels.
\3\ Federal taxes are equal to individual income tax (including the outlay portion of refundable cedits), employment tax (attributed to employees), and
excise taxes (attributed to consumers). Corporate income tax is not included due to uncertainty concerning the incidence of the tax. Individuals who
are dependents of other taxpayers and taxpayers with negative income are excluded from the analysis.
\4\ The average tax rate is equal to Federal taxes described in footnote 3 divided by income described in footnote 2.
\5\ Less than $500,000.
\6\ Less than 0.05%.
Distributional Effects of a Proposal to Provide Exchange Plan Credits and Subsidies to Certain Low-Income Taxpayers as Included in H.R. 4872, the
``Reconciliation Act of 2010,'' as Passed by the House in Combination With H.R. 3590, the ``Patient Protection and Affordable Care Act (PPACA),'' as
Passed by the Senate \1\
Calendar Year 2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGE IN FEDERAL TAXES FEDERAL TAXES \3\ FEDERAL TAXES \3\ AVERAGE TAX RATE \4\
\3\ UNDER PRESENT LAW UNDER PROPOSAL ---------------------
--------------------------------------------------------------------- Present Proposal
INCOME CATEGORY \2\ Law ----------
Millions Percent Billions Percent Billions Percent -----------
Percent Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................................ -$455 -4.4% $10 0.3% $10 0.3% 7.3% 6.9%
$10,000 to $20,000........................................... -$6,214 -32.6% $19 0.6% $13 0.4% 4.8% 3.2%
$20,000 to $30,000........................................... -$20,359 -39.0% $52 1.7% $32 1.1% 10.4% 6.3%
$30,000 to $40,000........................................... -$22,648 -25.8% $88 2.8% $65 2.2% 13.9% 10.3%
$40,000 to $50,000........................................... -$17,380 -15.7% $111 3.6% $94 3.1% 14.5% 12.2%
$50,000 to $75,000........................................... -$23,760 -7.3% $325 10.5% $301 10.0% 16.2% 15.0%
$75,000 to $100,000.......................................... -$6,865 -2.0% $346 11.1% $339 11.3% 18.0% 17.6%
$100,000 to $200,000......................................... -$1,173 -0.1% $887 28.5% $886 29.4% 22.6% 22.6%
$200,000 to $500,000......................................... \5\ \6\ $535 17.2% $535 17.8% 27.7% 27.7%
$500,000 to $1,000,000....................................... \5\ \6\ $205 6.6% $205 6.8% 29.9% 29.9%
$1,000,000 and over.......................................... \5\ \6\ $531 17.1% $531 17.6% 29.8% 29.8%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total, All Taxpayers..................................... -$98,853 -3.2% $3,109 100.0% $3,011 100.0% 21.2% 20.5%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Joint Committee on Taxation.
Detail may not add to total due to rounding.
------------------------------
\1\ The proposal would provide that refundable tax credits would be provided to taxpayers who enroll in exchange plans with income between 100 percent
and 400 percent of FPL. The proposal provides for outlays in the form of cost-sharing subsidies for out-of-pocket medical expenses for exchange
participants between 100% and 250% of FPL. The analysis is a stand-alone estimate of the effects of the subsidies and credits and does not indude
interaction with other parts of the broader package. The analysis is relative to present law before the enactment of PPACA.
\2\ The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: (1) tax-exempt interest, (2) employer
contributions for health plans and life insurance, (3) employer share of FICA tax, (4) worker's compensation, (5) nontaxable Social Security benefits,
(6) insurance value of Medicare benefits, (7) alternative minimum tax preference items, and (8) excluded income of U.S. citizens living abroad.
Categories are measured at 2009 levels.
\3\ Federal taxes are equal to individual income tax (including the outlay portion of refundable credits), employment tax (attributed to employees), and
excise taxes (attributed to consumers). Corporate income tax is not included due to uncertainty concerning the incidence of the tax. Individuals who
are dependents of other taxpayers and taxpayers with negative income are excluded from the analysis.
\4\ The average tax rate is equal to Federal taxes described in footnote 3 divided by income described in footnote 2.
\5\ Less than $500,000.
\6\ Less than 0.05%.
Distributional Effects of a Proposal to Provide Exchange Plan Credits and Subsidies to Certain Low-Income Taxpayers as Included in H.R. 4872, the
``Reconciliation Act of 2010,'' as Passed by the House in Combination With H.R. 3590, the ``Patient Protection and Affordable Care Act (PPACA),'' as
Passed by the Senate \1\
Calendar Year 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGE IN FEDERAL TAXES FEDERAL TAXES \3\ FEDERAL TAXES \3\ AVERAGE TAX RATE \4\
\3\ UNDER PRESENT LAW UNDER PROPOSAL ---------------------
---------------------------------------------------------------------- Present Proposal
INCOME CATEGORY \2\ Law ----------
Millions Percent Billions Percent Billions Percent -----------
Percent Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000........................................... -$575 -5.4% $11 0.3% $10 0.3% 7.0% 6.6%
$10,000 to $20,000.......................................... -$7,699 -37.3% $21 0.6% $13 0.4% 4.8% 3.0%
$20,000 to $30,000.......................................... -$23,750 -41.8% $57 1.7% $33 1.0% 10.4% 6.1%
$30,000 to $40,000.......................................... -$26,173 -27.6% $95 2.8% $69 2.1% 14.0% 10.1%
$40,000 to $50,000.......................................... -$19,981 -16.7% $120 3.5% $100 3.0% 14.5% 12.1%
$50,000 to $75,000.......................................... -$27,098 -7.7% $352 10.4% $325 9.9% 16.1% 14.9%
$75,000 to $100,000......................................... -$7,617 -2.0% $377 11.1% $370 11.3% 17.9% 17.5%
$100,000 to $200,000........................................ -$1,059 -0.1% $966 28.5% $965 29.4% 22.6% 22.6%
$200,000 to $500,000........................................ \5\ \6\ $589 17.3% $589 18.0% 27.9% 27.9%
$500,000 to $1,000,000...................................... \5\ \6\ $224 6.6% $224 6.8% 30.0% 30.0%
$1,000,000 and over......................................... \5\ \6\ $583 17.2% $583 17.8% 29.8% 29.8%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total, All Taxpayers........................................ -$113,952 -3.4% $3,393 100.0% $3,279 100.0% 21.2% 20.5%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Joint Committee on Taxation.
Detail may not add to total due to rounding.
------------------------------
\1\ The proposal would provide that refundable tax credits would be provided to taxpayers who enroll in exchange plans with income between 100 percent
and 400 percent of FPL. The proposal provides for outlays in the form of cost-sharing subsidies for out-of-pocket medical expenses for exchange
participants between 100% and 250% of FPL. The analysis Is a stand-alone estimate of the effects of the subsidies and credits and does not include
interaction with other parts of the broader package. The analysis is relative to present law before the enactment of PPACA.
\2\ The income concept used to place tax retums into income categories is adjusted gross income (AGI) plus: (1) tax-exempt interest, (2) employer
contributions for health plans and life insurance, (3) employer share of FICA tax, (4) worker's compensation, (5) nontaxable Social Security benefits,
(6) insurance value of Medicare benefits, (7) alternative minimum tax preference items, and (8) excluded income of U.S. citizens living abroad.
Categories are measured at 2009 levels.
\3\ Federal taxes are equal to individual income tax (including the outlay portion of refundable credits), employment tax (attributed to employees), and
excise taxes (attributed to consumers). Corporate income tax is not included due to uncertainty concerning the incidence of the tax. Individuals who
are dependents of other taxpayers and taxpayers with negative Income are excluded from the analysis.
\4\ The average tax rate is equal to Federal taxes described in footnote 3 divided by income described in footnote 2.
\5\ Less than $500,000.
\6\ Less than 0.05%.
Distributional Effects of a Proposal to Provide Exchange Plan Credits and Subsidies to Certain Low-Income Taxpayers as Included in H.R. 4872, the
``Reconciliation Act of 2010,'' as Passed by the House in Combination With H.R. 3590, the ``Patient Protection and Affordable Care Act (PPACA),'' as
Passed by the Senate \1\
(Returns in thousands; dollars in millions)
Calendar Year 2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGE IN FEDERAL TAXES \3\
-------------------------------------------------------------------------------------------
INCOME CATEGORY \2\ All Returns Single Filers Joint Filers Head of Household
-------------------------------------------------------------------------------------------
Returns Dollars Returns Dollars Returns Dollars Returns Dollars
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000........................................... 85 -$455 72 -$343 2 -$11 11 -$101
$10,000 to $20,000.......................................... 925 -$6,214 674 -$3,854 55 -$467 196 -$1,893
$20,000 to $30,000.......................................... 3,001 -$20,359 1,370 -$6,424 236 -$3,332 1,396 -$10,603
$30,000 to $40,000.......................................... 3,131 -$22,648 1,224 -$4,344 450 -$6,500 1,457 -$11,804
$40,000 to $50,000.......................................... 1.991 -$17,380 534 -$1,998 461 -$6,397 996 -$8,985
$50,000 to $75,000.......................................... 2,188 -$23,760 109 -$386 1,068 -$14,023 1,010 -$9,351
$75,000 to $100,000......................................... 638 -$6,865 \4\ -$1 555 -$6,186 83 -$678
$100,000 to $200,000........................................ 133 -$1.173 \4\ -$2 130 -$1,138 3 -$33
$200,000 to $500,000........................................ \4\ \5\ \4\ \5\ \4\ \5\ \4\ \5\
$500,000 to $1,000,000...................................... \4\ \5\ \4\ \5\ \4\ \5\ \4\ \5\
$1,000,000 and over......................................... \4\ \5\ \4\ \5\ \4\ \5\ \4\ \5\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total, All Taxpayers.................................... 12,092 -$98.853 3,983 -$17,351 2,957 -$38,054 5,152 -$43,448
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Joint Commlltee on Taxation.
Detail may not add to total due to rounding.
------------------------------
\1\ The proposal would provide that refundable tax credits would be provided to taxpayers who enroll in exchange plans with income between 100 percent
and 400 percent of FPL. The proposal provides for outlays in the form of cost-sharing subsidies for out-of-pocket medical expenses for exchange
participants between 100% and 250% of FPL. The analysis is a stand-alone estimate of the effects of the subsidies and credits and does not indude
interaction with other parts of the broader package. The analysis is relative to present law before the enactment of PPACA.
\2\ The income concept used to place tax retums into income categories is adjusted gross income (AGI) plus: (1) tax-exempt interest, (2) employer
contributions for health plans and life insurance, (3) employer share of FICA tax, (4) worker's compensation, (5) nontaxable Social Security benefits,
(6) insurance value of Medicare benefits, (7) alternative minimum tax preference items, and (8) excluded income of U.S. citizens living abroad.
Categories are measured at 2009 levels.
\3\ Federal taxes are equal to individual income tax (including the outlay portion of refundable credits), employment tax (attributed to employees), and
excise taxes (attributed to consumers). Corporate income tax is not included due to uncertainty concerning the incidence of the tax. Individuals who
are dependents of other taxpayers and taxpayers with negative income are excluded from the analysis.
\4\ The average tax rate is equal to Federal taxes described in footnote 3 divided by income described in footnote 2.
\5\ Less than $500,000.
\6\ Less than 0.05%.
Distributional Effects of a Proposal to Provide Exchange Plan Credits and Subsidies to Certain Low-Income Taxpayers as Included in H.R. 4872, the
``Reconciliation Act of 2010,'' as Passed by the House in Combination With H.R. 3590, the ``Patient Protection and Affordable Care Act (PPACA),'' as
Passed by the Senate \1\
(Returns in thousands; dollars in millions)
Calendar Year 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGE IN FEDERAL TAXES \3\
--------------------------------------------------------------------------------------------
INCOME CATEGORY \2\ All Returns Single Filers Joint Filers Head of Household
--------------------------------------------------------------------------------------------
Returns Dollars Returns Dollars Returns Dollars Returns Dollars
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000.......................................... 96 -$575 80 -$420 2 -$13 13 -$142
$10,000 to $20,000......................................... 1,028 -$7,699 709 -$4,503 62 -$596 257 -$2,600
$20,000 to $30,000......................................... 3,163 -$23,750 1,378 -$7,065 269 -$4,210 1,516 -$12,475
$30,000 to $40,000......................................... 3,283 -$26,173 1,224 -$4,912 539 -$8,482 1,520 -$12,779
$40,000 to $50,000......................................... 2,015 -$19,981 498 -$2,087 503 -$7,661 1,014 -$10,233
$50,000 to $75,000......................................... 2,266 -$27,098 104 -$402 1,115 -$16,186 1,047 -$10,510
$75,000 to $100,000........................................ 661 -$7,617 1 -$1 579 -$6,962 81 -$654
$100,000 to $200,000....................................... 112 -$1,059 \4\ -$2 111 -$1,052 1 -$5
$200,000 to $500,000....................................... \4\ \5\ \4\ \5\ \4\ \5\ \4\ \5\
$500,000 to $1,000,000..................................... \4\ \5\ \4\ \5\ \4\ \5\ \4\ \5\
$1,000,000 and over........................................ \4\ \5\ \4\ \5\ \4\ \5\ \4\ \5\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total, All Taxpayers................................... 12,623 -$113,952 3,994 -$19,392 3,180 -$45,162 5,449 -$49,398
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Joint Committee on Taxation.
Detail may not add to total due to rounding.
------------------------------
\1\ The proposal would provide that refundable tax credits would be provided to taxpayers who enroll in exchange plans with income between 100 percent
and 400 percent of FPL. The proposal provides for outlays in the form of cost-sharing subsidies for out-of-pocket medical expenses for exchange
participants between 100% and 250% of FPL. The analysis is a stand-alone estimate of the effects of the subsidies and credits and does not include
interaction with other parts of the broader package. The analysis is relative to present law before the enactment of PPACA.
\2\ The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: (1) tax-exempt interest, (2) employer
contributions for health plans and life insurance, (3) employer share of FICA tax, (4) worker's compensation, (5) nontaxable Social Security benefits,
(6) insurance value of Medicare benefits, (7) alternative minimum tax preference items, and (8) excluded income of U.S. citizens living abroad.
Categories are measured at 2009 levels.
\3\ Federal taxes are equal to individual income tax (including the outlay portion of refundable credits), employment tax (attributed to employees), and
excise taxes (attributed to consumers). Corporate income tax is not included due to uncertainty concerning the incidence of the tax. Individuals who
are dependents of other taxpayers and taxpayers with negative income are excluded from the analysis.
\4\ The average tax rate is equal to Federal taxes described in footnote 3 divided by income described in footnote 2.
\5\ Less than $500,000.
\6\ Less than 0.05%.
Distributional Effects of a Proposal to Increase the Hospital Insurance (HI) Tax on Certain High-Income
Individuals and Impose a Medicare Tax on Certain Unearned Income as Included in H.R. 4872, the ``Reconciliation
Act of 2010,'' as Passed by the House in Combination With H.R. 3590, the ``Patient Protection and Affordable
Care Act (PPACA),'' as Enacted \1\
(Returns in thousands)
Calendar Year 2015
----------------------------------------------------------------------------------------------------------------
NUMBER OF RETURNS AFFECTED
---------------------------------------------------------------------------
INCOME CATEGORY \2\ All Returns Single Filers Joint Filers Head of Household
---------------------------------------------------------------------------
Returns Returns Returns Returns
----------------------------------------------------------------------------------------------------------------
Less than $10,000................... \3\ \3\ \3\ \3\
$10,000 to $20,000.................. \3\ \3\ \3\ \3\
$20,000 to $30,000.................. 1 1 \3\ \3\
$30,000 to $40,000.................. 1 1 \3\ \3\
$40,000 to $50,000.................. \3\ \3\ \3\ \3\
$50,000 to $75,000.................. 4 1 1 1
$75,000 to $100,000................. 4 3 2 \3\
$100,000 to $200,000................ 250 110 124 16
$200,000 to $500,000................ 3,209 648 2,446 115
$500,000 to $1,000,000.............. 825 106 695 24
$1,000,000 and over................. 457 61 385 10
----------------------------------------------------------------------------------------------------------------
Total, All Taxpayers................ 4,752 931 3,654 167
----------------------------------------------------------------------------------------------------------------
Source: Joint Committee on Taxation.
Detail may not add to total due to rounding.
------------------------------
\1\ The proposal would increase the HI tax by 0.9 percentage points on earnings in exess of $200,000 ($250,000
for married taxpayers filing a joint return). Also, the proposal would impose a 3.8% tax on the investment
income of taxpayers with AGI in excess of $200,000 ($250,000). The income thresholds are not indexed for
inflation. The analysis is relative to present law before the enactment of PPACA.
\2\ The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: (1)
tax-exempt interest, (2) employer contributions for health plans and life insurance, (3) employer share of
FICA tax, (4) worker's compensation, (5) nontaxable Social Security benefits, (6) insurance value of Medicare
benefits, (7) alternative minimum tax preference items, and (8) excluded income of U.S. citizens living
abroad. Categories are measured at 2009 levels.
\3\ Less than 500.
Distributional Effects of a Proposal to Increase the Hospital Insurance (HI) Tax on Certain High-Income
Individuals and Impose a Medicare Tax on Certain Unearned Income as Included in H.R. 4872, the ``Reconciliation
Act of 2010,'' as Passed by the House in Combination With H.R. 3590, the ``Patient Protection and Affordable
Care Act (PPACA),'' as Enacted \1\
(Returns in thousands)
Calendar Year 2017
----------------------------------------------------------------------------------------------------------------
NUMBER OF RETURNS AFFECTED
---------------------------------------------------------------------------
INCOME CATEGORY \1\ All Returns Single Filers Joint Filers Head of Household
---------------------------------------------------------------------------
Returns Returns Returns Returns
----------------------------------------------------------------------------------------------------------------
Less than $10,000................... \3\ \3\ \3\ \3\
$10,000 to $20,000.................. \3\ \3\ \3\ \3\
$20,000 to $30,000.................. \3\ \3\ \3\ \3\
$30,000 to $40,000.................. 2 2 \3\ \3\
$40,000 to $50,000.................. \3\ \3\ \3\ \3\
$50,000 to $75,000.................. 4 2 1 1
$75,000 to $100,000................. 4 2 2 \3\
$100,000 to $200,000................ 428 228 168 32
$200,000 to $500,000................ 3,718 681 2,914 123
$500,000 to $1,000,000.............. 853 110 718 25
$1,000,000 and over................. 476 64 401 11
----------------------------------------------------------------------------------------------------------------
Total, All Taxpayers............ 5,485 1,089 4,204 192
----------------------------------------------------------------------------------------------------------------
Source: Joint Committee on Taxation.
Detail may not add to total due to rounding.
------------------------------
\1\ The proposal would increase the HI tax by 0.9 percentage points on earnings in exess of $200,000 ($250,000
for married taxpayers filing a joint return). Also, the proposal would impose a 3.8% tax on the investment
income of taxpayers with AGI in excess of $200,000 ($250,000). The income thresholds are not indexed for
inflation. The analysis is relative to present law before the enactment of PPACA.
\2\ The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: (1)
tax-exempt Interest, (2) employer contributions for health plans and life insurance, (3) employer share of
FICA tax, (4) worker's compensation, (5) nontaxable Social Security benefits, (6) insurance value of Medicare
benefits, (7) alternative minimum tax preference items, and (8) excluded income of U.S. citizens living
abroad. Categories are measured at 2009 levels.
\3\ Less than 500.
Distributional Effects of a Proposal to Increase the Hospital Insurance (HI) Tax on Certain High-Income
Individuals and Impose a Medicare Tax on Certain Unearned Income as Included in H.R. 4872, the ``Reconciliation
Act of 2010'' as Passed by the House in Combination With H.R. 3590, the ``Patient Protection and Affordable Care
Act (PPACA),'' as Enacted \1\
(Returns in thousands)
Calendar Year 2019
----------------------------------------------------------------------------------------------------------------
NUMBER OF RETURNS AFFECTED
---------------------------------------------------------------------------
INCOME CATEGORY \1\ All Returns Single Filers Joint Filers Head of Household
---------------------------------------------------------------------------
Returns Returns Returns Returns
----------------------------------------------------------------------------------------------------------------
Less than $10,000................... \3\ \3\ \3\ \3\
$10,000 to $20,000.................. \3\ \3\ \3\ \3\
$20,000 to $30,000.................. \3\ \3\ \3\ \3\
$30,000 to $40,000.................. 1 1 \3\ \3\
$40,000 to $50,000.................. 1 1 \3\ \3\
$50,000 to $75,000.................. 4 2 1 1
$75,000 to $100,000................. 7 3 5 \3\
$100,000 to $200,000................ 627 355 209 63
$200,000 to $500,000................ 4,282 712 3,441 129
$500,000 to $1,000,000.............. 881 114 741 26
$1,000,000 and over................. 492 67 413 11
----------------------------------------------------------------------------------------------------------------
Total, All Taxpayers............ 6,295 1,254 4,810 231
----------------------------------------------------------------------------------------------------------------
Source: Joint Committee on Taxation.
Detail may not add to total due to rounding.
------------------------------
\1\ The proposal would increase the HI tax by 0.9 percentage points on earnings in exess of $200,000 ($250,000
for married taxpayers filing a joint return). Also, the proposal would impose a 3.8% tax on the investment
income of taxpayers with AGI in excess of $200,000 ($250,000). The income thresholds are not indexed for
inflation. The analysis is relative to present law before the enactment of PPACA.
\2\ The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: (1)
tax-exempt interest, (2) employer contributions for health plans and life insurance, (3) employer share of
FICA tax, (4) worker's compensation, (5) nontaxable Social Security benefits, (6) insurance value of Medicare
benefits, (7) alternative minimum tax preference items, and (8) excluded income of U.S. citizens living
abroad. Categories are measured at 2009 levels.
\3\ Less than 500.
Distributional Effects of a Proposal to Increase the AGI Floor for the Medical Expense Deduction to 10 Percent as Included in H.R. 4872, the
``Reconciliation Act of 2010,'' as Passed by the House in Combination With H.R. 3590, the ``Patient Protection and Affordable Care Act (PPACA),'' as
Passed by the Senate \1\
Calendar Year 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGE IN FEDERAL FEDERAL TAXES \3\ FEDERAL TAXES \3\ AVERAGE TAX RATE \4\
TAXES \3\ UNDER PRESENT LAW UNDER PROPOSAL ---------------------
------------------------------------------------------------------ Present Proposal
INCOME CATEGORY \2\ Law ----------
Millions Percent Billions Percent Billions Percent -----------
Percent Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................................... $0 0.0% $10 0.4% $10 0.4% 7.6% 7.6%
$10,000 to $20,000.............................................. $11 0.1% $18 0.6% $18 0.6% 4.8% 4.8%
$20,000 to $30,000.............................................. $45 0.1% $48 1.7% $48 1.7% 10.3% 10.3%
$30,000 to $40,000.............................................. $105 0.1% $81 2.9% $82 2.9% 13.8% 13.8%
$40,000 to $50,000.............................................. $159 0.2% $103 3.6% $103 3.6% 14.5% 14.6%
$50,000 to $75,000.............................................. $484 0.2% $299 10.5% $300 10.6% 16.2% 16.2%
$75,000 to $100,000............................................. $375 0.1% $318 11.2% $319 11.2% 18.1% 18.1%
$100,000 to $200,000............................................ $437 0.1% $812 28.6% $812 28.6% 22.5% 22.5%
$200,000 to $500,000............................................ $32 \5\ $484 17.0% $484 17.0% 27.4% 27.4%
$500,000 to $1,000,000.......................................... $14 \5\ $186 6.6% $186 6.6% 29.8% 29.8%
$1,000,000 and over............................................. $4 \5\ $479 16.9% $479 16.9% 29.8% 29.8%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total, All Taxpayers........................................ $1,666 0.1% $2,838 100.0% $2,840 100.0% 21.1% 21.1%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Joint Committee on Taxation.
Detail may not add to total due to rounding.
------------------------------
\1\ The proposal would increase the AGI threshold for the deduction of medical expenses from 7.5% to 10%. The proposal does not apply to individuals age
65 and older for tax years before 2017. The analysis is relative to present law before the enactment of PPACA.
\2\ The Income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: (1) tax-exempt interest, (2) employer
contributions for health plans and life insurance, (3) employer share of FICA tax, (4) worker's compensation, (5) nontaxable Social Security benefits,
(6) insurance value of Medicare benefits, (7) alternative minimum tax preference items, and (8) excluded income of U.S. citizens living abroad.
Categories are measured at 2009 levels.
\3\ Federal taxes are equal to individual income tax (including the outlay portion of refundable credits), employment tax (attributed to employees), and
excise taxes (attributed to consumers). Corporate income tax is not included due to uncertainty concerning the incidence of the tax. Individuals who
are dependents of other taxpayers and taxpayers with negative income are excluded from the analysis.
\4\ The average tax rate is equal to Federal taxes described in footnote 3 divided by income described in footnote 2.
\5\ Less than 0.05%.
\6\ Less than $500,000.
Distributional Effects of a Proposal to Increase the AGI Floor for the Medical Expense Deduction to 10 Percent as Included in H.R. 4872, the
``Reconciliation Act of 2010,'' as Passed by the House in Combination With H.R. 3590, the ``Patient Protection and Affordable Care Act (PPACA),'' as
Passed by the Senate \1\
Calendar Year 2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGE IN FEDERAL FEDERAL TAXES \3\ FEDERAL TAXES \3\ AVERAGE TAX RATE \4\
TAXES \3\ UNDER PRESENT LAW UNDER PROPOSAL ---------------------
------------------------------------------------------------------ Present Proposal
INCOME CATEGORY \2\ Law ----------
Millions Percent Billions Percent Billions Percent -----------
Percent Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................................... \6\ \5\ $10 0.3% $10 0.3% 7.3% 7.3%
$10,000 to $20,000.............................................. $16 0.1% $19 0.6% $19 0.6% 4.8% 4.8%
$20,000 to $30,000.............................................. $63 0.1% $52 1.7% $52 1.7% 10.4% 10.4%
$30,000 to $40,000.............................................. $146 0.2% $88 2.8% $88 2.8% 13.9% 13.9%
$40,000 to $50,000.............................................. $246 0.2% $111 3.6% $111 3.6% 14.5% 14.6%
$50,000 to $75,000.............................................. $899 0.3% $325 10.5% $326 10.5% 16.2% 16.2%
$75,000 to $100,000............................................. $906 0.3% $346 11.1% $347 11.2% 18.0% 18.0%
$100,000 to $200,000............................................ $1,309 0.1% $887 28.5% $889 28.5% 22.6% 22.6%
$200,000 to $500,000............................................ $109 \5\ $535 17.2% $535 17.2% 27.7% 27.7%
$500,000 to $1,000,000.......................................... $24 \5\ $205 6.6% $205 6.6% 29.9% 29.9%
$1,000,000 and over............................................. $15 \5\ $531 17.1% $531 17.0% 29.8% 29.8%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total, All Taxpayers........................................ $3,734 0.1% $3,109 100.0% $3,113 100.0% 21.2% 21.2%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Joint Committee on Taxation.
Detail may not add to total due to rounding.
------------------------------
\1\ The proposal would increase the AGI threshold for the deduction of medical expenses from 7.5% to 10%. The proposal does not apply to individuals age
65 and older for tax years before 2017. The analysis is relative to present law before the enactment of PPACA.
\2\ The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: (1) tax-exempt interest, (2) employer
contributions for health plans and life insurance, (3) employer share of FICA tax, (4) worker's compensation, (5) nontaxable Social Security benefits,
(6) insurance value of Medicare benefits, (7) alternative minimum tax preference items, and (8) excluded income of U.S. citizens living abroad.
Categories are measured at 2009 levels.
\3\ Federal taxes are equal to individual income tax (including the outlay portion of refundable credits), employment tax (attributed to employees), and
excise taxes (attributed to consumers). Corporate income tax is not included due to uncertainty concerning the incidence of the tax. Individuals who
are dependents of other taxpayers and taxpayers with negative income are excluded from the analysis.
\4\ The average tax rate is equal to Federal taxes described in footnote 3 divided by income described in footnote 2.
\5\ Less than 0.05%.
\6\ Less than $500,000.
Distributional Effects of a Proposal to Increase the AGI Floor for the Medical Expense Deduction to 10 Percent as Included in H.R. 4872, the
``Reconciliation Act of 201O,'' as Passed by the House in Combination With H.R. 3590, the ``Patient Protection and Affordable Care Act (PPACA),'' as
Passed by the Senate \1\
Calendar Year 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGE IN FEDERAL FEDERAL TAXES \3\ FEDERAL TAXES \3\ AVERAGE TAX RATE \4\
TAXES \3\ UNDER PRESENT LAW UNDER PROPOSAL ---------------------
------------------------------------------------------------------ Present Proposal
INCOME CATEGORY \2\ Law ----------
Millions Percent Billions Percent Billions Percent -----------
Percent Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................................... $1 \5\ $11 0.3% $11 0.3% 7.0% 7.0%
$10,000 to $20,000.............................................. $21 0.1% $21 0.6% $21 0.6% 4.8% 4.8%
$20,000 to $30,000.............................................. $76 0.1% $57 1.7% $57 1.7% 10.4% 10.5%
$30,000 to $40,000.............................................. $174 0.2% $95 2.8% $95 2.8% 14.0% 14.0%
$40,000 to $50,000.............................................. $284 0.2% $120 3.5% $120 3.5% 14.5% 14.5%
$50,000 to $75,000.............................................. $1,005 0.3% $352 10.4% $353 10.4% 16.1% 16.2%
$75,000 to $100,000............................................. $1,008 0.3% $377 11.1% $378 11.1% 17.9% 17.9%
$100,000 to $200,000............................................ $1,343 0.1% $966 28.5% $967 28.5% 22.6% 22.7%
$200,000 to $500,000............................................ $105 \5\ $589 17.3% $589 17.3% 27.9% 27.9%
$500,000 to $1,000,000.......................................... $27 \5\ $224 6.6% $224 6.6% 30.0% 30.0%
1,000,000 and over.............................................. $16 \5\ $583 17.2% $583 17.1% 29.8% 29.8%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total, All Taxpayers........................................ $4,060 0.1% $3,393 100.0% $3,397 100.0% 21.2% 21.2%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Joint Committee on Taxation.
Detail may not add to total due to rounding.
------------------------------
\1\ The proposal would increase the AGI threshold for the deduction of medical expenses from 7.5% to 10%. The proposal does not apply to individuals age
65 and older for tax years before 2017. The analysis is relative to present law before the enactment of PPACA.
\2\ The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: (1) tax-exempt interest, (2) employer
contributions for health plans and life insurance, (3) employer share of FICA tax, (4) worker's compensation, (5) nontaxable Social Security benefits,
(6) insurance value of Medicare benefits, (7) alternative minimum tax preference items, and (8) excluded income of U.S. citizens living abroad.
Categories are measured at 2009 levels.
\3\ Federal taxes are equal to individual income tax (including the outlay portion of refundable credits), employment tax (attributed to employees), and
excise taxes (attributed to consumers). Corporate income tax is not included due to uncertainty concerning the incidence of the tax. Individuals who
are dependents of other taxpayers and taxpayers with negative income are excluded from the analysis.
\4\ The average tax rate is equal to Federal taxes described in footnote 3 divided by income described in footnote 2.
\5\ Less than 0.05%.
Distributional Effects of a Proposal to Increase the AGI Floor for the Medical Expense Deduction to 10 Percent as Included in H.R. 4872, the
``Reconciliation Act of 2010,'' as Passed by the House in Combination With H.R. 3590, the ``Patient Protection and Affordable Care Act (PPACA),'' as
Passed by the Senate \1\
(Returns in thousands; dollars in millions)
Calendar Year 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGE IN FEDERAL TAXES \3\
---------------------------------------------------------------------------------------
INCOME CATEGORY \2\ All Returns Single Filers Joint Filers Head of Household
---------------------------------------------------------------------------------------
Returns Dollars Returns Dollars Returns Dollars Returns Dollars
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................................... 6 \5\ 5 \5\ 1 \5\ \4\ \5\
$10,000 to $20,000.............................................. 204 $11 164 $8 24 $2 16 $1
$20,000 to $30,000.............................................. 564 $45 357 $28 141 $12 66 $5
$30,000 to $40,000.............................................. 953 $105 502 $54 312 $37 139 $15
$40,000 to $50,000.............................................. 1,131 $159 508 $73 391 $55 232 $31
$50,000 to $75,000.............................................. 2,321 $484 626 $168 1,310 $253 384 $63
$75,000 to $100,000............................................. 1,263 $375 146 $70 1,052 $285 65 $19
$100,000 to $200,000............................................ 794 $437 67 $50 716 $381 11 $6
$200,000 to $500,000............................................ 21 $32 3 $4 18 $25 \4\ $2
$500,000 to $1,000,000.......................................... 2 $14 \4\ $1 2 $10 \4\ $3
$1,000,000 and over............................................. \4\ $4 \4\ $1 \4\ $3 \4\ \5\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total, All Taxpayers........................................ 7,259 $1,668 2,378 $459 3,967 $1,063 913 $144
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Joint Committee on Taxation.
Detail may not add to total due to rounding.
------------------------------
\1\ The proposal would increase the AGI threshold for the deduction of medical expenses from 7.5% to 10%. The proposal does not apply to individuals age
65 and older for tax years before 2017. The analysis is relative to present law before the enactment of PPACA.
\2\ The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: (1) tax-exempt interest, (2) employer
contributions for health plans and life insurance, (3) employer share of FICA tax, (4) worker's compensation, (5) nontaxable Social Security benefits,
(6) insurance value of Medicare benefits, (7) alternative minimum tax preference items, and (8) excluded income of U.S. citizens living abroad.
Categories are measured at 2009 levels.
\3\ Federal taxes are equal to individual income tax (including the outlay portion of refundable credits), employment tax (attributed to employees), and
excise taxes (attributed to consumers). Corporate income tax is not included due to uncertainty concerning the incidence of the tax. Individuals who
are dependents of other taxpayers and taxpayers with negative income are excluded from the analysis.
\4\ Less than 500.
\5\ Less than $500,000.
Distributional Effects of a Proposal to Increase the AGI Floor for the Medical Expense Deduction to 10 Percent as Included in H.R. 4872, the
``Reconciliation Act of 2010,'' as Passed by the House in Combination With H.R. 3590, the ``Patient Protection and Affordable Care Act (PPACA),'' as
Passed by the Senate \1\
(Returns in thousands; dollars in millions)
Calendar Year 2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGE IN FEDERAL TAXES \3\
---------------------------------------------------------------------------------------
INCOME CATEGORY \2\ All Returns Single Filers Joint Filers Head of Household
---------------------------------------------------------------------------------------
Returns Dollars Returns Dollars Returns Dollars Returns Dollars
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................................... 10 \5\ 9 \5\ 2 \5\ \4\ \5\
$10,000 to $20,000.............................................. 292 $16 241 $12 31 $2 20 $1
$20,000 to $30,000.............................................. 759 $63 496 $40 185 $16 78 $7
$30,000 to $40,000.............................................. 1,344 $146 760 $78 394 $48 190 $21
$40,000 to $50,000.............................................. 1,841 $246 1,072 $134 501 $75 269 $36
$50,000 to $75,000.............................................. 4,258 $899 1,812 $446 2,034 $381 413 $72
$75,000 to $100,000............................................. 3,053 $906 521 $251 2,466 $635 66 $20
$100,000 to $200,000............................................ 2,225 $1,309 280 $196 1,931 $1,106 14 $7
$200,000 to $500,000............................................ 81 $109 15 $29 65 $78 \4\ $2
$500,000 to $1,000,000.......................................... 4 $24 1 $5 3 $16 \4\ $4
$1,000,000 and over............................................. 1 $15 \4\ $5 1 $10 \4\ \5\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total, All Taxpayers........................................ 13,869 $3,734 5,207 $1,196 7,611 $2,367 1,051 $171
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Joint Committee on Taxation.
Detail may not add to total due to rounding.
------------------------------
\1\ The proposal would increase the AGI threshold for the deduction of medical expenses from 7.5% to 10%. The proposal does not apply to individuals age
65 and older for tax years before 2017. The analysis is relative to present law before the enactment of PPACA.
\2\ The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: (1) tax-exempt interest, (2) employer
contributions for health plans and life insurance, (3) employer share of FICA tax, (4) worker's compensation, (5) nontaxable Social Security benefits,
(6) insurance value of Medicare benefits, (7) alternative minimum tax preference items, and (8) excluded income of U.S. citizens living abroad.
Categories are measured at 2009 levels.
\3\ Federal taxes are equal to individual income tax (including the outlay portion of refundable credits), employment tax (attributed to employees), and
excise taxes (attributed to consumers). Corporate income tax is not included due to uncertainty concerning the incidence of the tax. Individuals who
are dependents of other taxpayers and taxpayers with negative income are excluded from the analysis.
\4\ Less than 500.
\5\ Less than $500,000.
Distributional Effects of a Proposal to Increase the AGI Floor for the Medical Expense Deduction to 10 Percent as Included in H.R. 4872, the
``Reconciliation Act of 2010,'' as Passed by the House in Combination With H.R. 3590, the ``Patient Protection and Affordable Care Act (PPACA),'' as
Passed by the Senate \1\
(Returns in thousands; dollars in millions)
Calendar Year 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGE IN FEDERAL TAXES \3\
---------------------------------------------------------------------------------------
INCOME CATEGORY \2\ All Returns Single Filers Joint Filers Head of Household
---------------------------------------------------------------------------------------
Returns Dollars Returns Dollars Returns Dollars Returns Dollars
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................................... 17 $1 16 $1 1 \5\ \4\ \5\
$10,000 to $20,000.............................................. 347 $21 287 $17 36 $2 24 $2
$20,000 to $30,000.............................................. 844 $76 543 $47 202 $20 99 $10
$30,000 to $40,000.............................................. 1,508 $174 837 $91 419 $54 252 $29
$40,000 to $50,000.............................................. 2,007 $284 1,191 $160 537 $85 279 $39
$50,000 to $75,000.............................................. 4,508 $1,005 1,949 $508 2,143 $421 417 $77
$75,000 to $100,000............................................. 3,232 $1,008 546 $278 2,636 $713 50 $17
$100,000 to $200,000............................................ 2,274 $1,343 285 $203 1,979 $1,136 9 $5
$200,000 to $500,000............................................ 73 $105 15 $29 58 $74 1 $3
$500,000 to $1,000,000.......................................... 4 $27 1 $5 3 $17 1 $4
$1,000,000 and over............................................. 1 $16 \4\ $6 1 $11 \4\ \5\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total, All Taxpayers........................................ 14,817 $4,060 5,671 $1,344 8,015 $2,532 1,131 $184
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Joint Committee on Taxation.
Detail may not add to total due to rounding.
------------------------------
\1\ The proposal would increase the AGI threshold for the deduction of medical expenses from 7.5% to 10%. The proposal does not apply to individuals age
65 and older for tax years before 2017. The analysis is relative to present law before the enactment of PPACA.
\2\ The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: (1) tax-exempt interest, (2) employer
contributions for health plans and life insurance, (3) employer share of FICA tax, (4) worker's compensation, (5) nontaxable Social Security benefits,
(6) insurance value of Medicare benefits, (7) alternative minimum tax preference items, and (8) excluded income of U.S. citizens living abroad.
Categories are measured at 2009 levels.
\3\ Federal taxes are equal to individual income tax (including the outlay portion of refundable credits), employment tax (attributed to employees), and
excise taxes (attributed to consumers). Corporate income tax is not included due to uncertainty concerning the incidence of the tax. Individuals who
are dependents of other taxpayers and taxpayers with negative income are excluded from the analysis.
\4\ Less than 500.
\5\ Less than $500,000.
Based on your review, do you agree with one Democratic member's
assertion that there is not ``one dime'' of a tax increase on taxpayers
with incomes under $200,000?
Answer. I have reviewed the tables, and according to Footnote 6,
the increase is less than 0.05%.
Question. Based on your review, do you agree with the Joint
Committee on Taxation that there are several tax increase proposals on
taxpayers with incomes under $200,000 that the Joint Committee on
Taxation said were present, but which they could not distribute?
Answer. Yes.
Question. Based on your review, do you agree with the Joint
Committee on Taxation that the proposal cutting back the itemized
deduction for catastrophic medical losses affects at least 1 million
more taxpayers with incomes under $200,000 than the number of taxpayers
in the same cohort who receive exchange credits and other tax
subsidies?
Answer. Yes.
corporate integration
Question. I was pleased to hear you say in the hearing, in your
dialogue with Senator Scott, that you see the issues of individual and
corporate tax reform as linked. As you may know, I am very interested
in integrating the individual income tax system and the corporate
income tax system. Please share with me your thoughts about corporate
integration.
Answer. I commend your hard work in reforming the corporate tax
system to make the U.S. more competitive. I look forward to working
with you in these efforts.
treasury/irs compliance with administrative law
Question. There has been an unfortunate trend in recent decades
suggesting that tax regulations are somehow not subject to the normal
requirements of administrative law.
That trend has suggested that somehow tax regulations and other
rules promulgated by the IRS are not subject to the same notice and
comment period as other regulations by other Federal agencies, that
they are not subject to the same cost-benefit analysis as other Federal
regulations, that they are not subject to the same OMB Office of
Information and Regulatory Affairs analysis as other Federal
regulations, and that they are not subject to the same Congressional
Review Act requirements as other Federal agencies.
The Supreme Court, in its 2011 Mayo decision, and the Tax Court, in
its 2015 Altera decision, instructed the IRS that the IRS is not exempt
from administrative law requirements. The IRS is subject to the same
administrative law requirements as other Federal agencies.
Can you assure me that you will make sure that IRS regulations,
rules, and guidance comply with administrative law requirements?
Answer. If confirmed, I will ensure that the Treasury follows the
requirements of administrative law, where applicable.
efficient taxation
Question. The United States may overly rely on the income tax. A
fair amount of study on the topic has suggested that a tax on savings/
investment increases the cost to capital, thus, in turn decreasing
capital formation, wage growth, and GDP growth. Would either
consumption or land-value be a more efficient tax base as compared with
income? Could a shift to such a tax base be done in a approximately
distributionally neutral fashion?
Answer. The objective of tax reform should be to collect the
revenue the government needs to fund the proper functions of government
and maximize growth and opportunity for all Americans. If confirmed, I
will work with you to find the best and most efficient way to do that.
ec state aid rulings/investigations
Question. I appreciated that your predecessor (if you are
confirmed), Jack Lew, responding to bipartisan concerns, was vigilant
in criticizing and protesting the European Commission State Rulings/
Investigations. I'm concerned that the EC State Aid Rulings/
Investigations are retroactive in effect, unfairly target U.S.
multinational enterprises, call into question the legal stability of
the EU, call into question the sovereignty of EU members states as to
tax matters, and call into question the stability of the numerous tax
treaties the United States has with various EU member states. Will you
please assure the committee that you will continue the bipartisan
efforts of your predecessor in this regard?
Answer. Yes, I assure you I will continue in these efforts.
hidden effective tax rate increases
Question. I have been concerned that there are numerous hidden
effective tax rate increases throughout the Internal Revenue Code. To
name just a few: The section 32 Earned Income Tax Credit phase-out, the
section 24(b)(1) Child Tax Credit limitation, the section 68 Pease
limitation on itemized deductions, and the section 151(d)(3) Personal
Exemption Phaseout (PEP). I'm concerned about these effective tax rates
for two different reasons: (1) they are hidden, taxpayers don't know
about them, and thus imposing these tax rate increases is contrary to
principles of transparent government; and (2) to the extent taxpayers
do know about these tax-rate increases, they discourage further income
production.
Perhaps the reality is somewhere in between these two--most
taxpayers don't quite understand that there are these hidden tax-rate
increases, but they do know that somehow, despite harder work, and
higher pre-tax pay, they find it difficult to move up the economic
ladder. Whatever the case, what are your thoughts? Will you work with
me to combat creation of additional hidden effective tax rate
increases? Would you work with the committee to reduce/eliminate hidden
effective tax rate increases?
Answer. I look forward to working with you to give Americans a tax
code that is fair, transparent and rewards hard work, saving, and
investment.
If confirmed, I will work with you to eliminate or minimize
``hidden effective tax rates.''
congressional review act
Question. Do you agree that before a Treasury rule takes effect,
the Treasury Department, pursuant to the Congressional Review Act, must
submit to Congress a report, which among other things must state
whether the rule is a major or non-major rule?
Do you agree that only the Administrator of the Office of
Information and Regulatory Affairs of the Office of Management and
Budget may make a finding that a rule is a major rule within the
meaning of 5 U.S.C. section 804(2)? If yes, then does this imply that
all Treasury rules must be reviewed by the Administrator of OIRA to
determine whether it is major?
Answer. I am aware that there is an agreement between Treasury and
OMB that dates back to 1983 with regard to review of certain Treasury
rules. If confirmed, I pledge to review that agreement in order to
learn more about its purpose and history.
Question. Last year the Finance Committee reported out a bi-
partisan retirement reform bill, on a 26 to 0 vote (S. 3471, 114th
Cong.), that included reforms such as additional incentives for small
businesses that set up retirement plans, authorization for employers to
join so-called ``multiple employer plans'' so that they can join forces
to share the costs of offering a plan, and a provision making it easier
for employers to provide, and for employees to purchase, retirement
annuities in their 401(k)-type plans.
You may not have had a chance to focus on retirement reform
legislative issues yet, but retirement reform has been a priority with
the committee for quite some time and has very strong, bipartisan
support.
Can you assure me that the Treasury Department will work with the
Finance Committee in the 115th Congress to enact retirement reform?
Answer. I look forward to working with the finance committee on
retirement reform.
______
Questions Submitted by Hon. Ron Wyden
irs resources
Question. Mr. Mnuchin, over the years, the IRS budget has been cut.
The IRS FY 2016 budget was $11.235 billion, including an additional
$290 million marked specifically for customer service, combating stolen
identity refund fraud, and cybersecurity. This budget is 7% lower than
its high-water mark funding level in FY 2010 ($12.146 billion), or 17%,
adjusted for inflation. The cut in resources has impacted taxpayer
services and enforcement of the tax laws.
Do you see this as a problem?
Answer. If confirmed, I will review the appropriate resources for
the IRS and see how these cuts have impacted taxpayer services and
enforcement of the tax laws.
Question. What are your plans for fixing this issue? You told
Finance Committee staff that you were surprised IRS staffing had fallen
over time. Indeed, IRS full-time equivalents have declined from 94,618
employees in FY 2010 to 82,705 in FY 2016, a decrease of 12.6 percent.
Do your plans possibly include hiring more IRS employees? How would IRS
hiring be affected by President Trump's planned Federal employee hiring
freeze?
Answer. To the extent that additional resources are needed to
increase revenues and improve taxpayer services, I will commit to work
with the President to exempt the IRS from a hiring freeze.
Question. Recent attacks on IRS's IP PIN and the IRS Get Transcript
applications highlight the inadequacy of IRS systems and electronic
authentication procedures. Are you concerned about IRS's antiquated
systems and technology? What about their cybersecurity? Would you give
IRS additional resources to address these chronic issues?
Answer. Based upon the information I have seen, I am concerned
about the IRS's technology and cybersecurity resources. I would work
with the IRS commissioner to ensure that we have the necessary
resources.
Question. It's also no secret that you need more resources to stay
ahead of the crooks, starting with having the right cybersecurity and
IT experts. Many of those experts were hired using ``Streamlined
Critical Pay'' authority. The ability to fill the Chief Technology
Officer position using this authority already expired in June of last
year and the remaining positions are scheduled to expire during the
course of 2017. IRS will face mounting IT and cybersecurity threats if
Congress fails to renew streamlined critical pay authority for the
agency. Is this an authority you will push for as Treasury Secretary?
By way of background, in 1998, Congress gave the IRS streamlined
critical pay authority, which allowed the Secretary of Treasury to
appoint individuals to critical positions within the IRS. The initial
authority expired in 2008, but Congress extended it to September 30,
2013, but not thereafter. Over the period, the IRS has created 168
positions using this authority. The largest number of these positions
has been in IT (a total of 93). The purpose of the streamlined critical
pay authority was to give the IRS the ability to attract and hire
expertise that wasn't available within the agency. Streamlined critical
pay authority allows higher compensation than the typical GS schedule.
In addition, the time to process the candidate is shorter--4 to 6 weeks
rather than 3 to 4 months. Currently, the IRS has 13 streamlined
critical pay positions. The IRS's Chief Technology Officer position,
however, expired in June of last year, and the remaining positions
expire in 2017.
Answer. This issue is of tremendous importance, and I propose to
address it very seriously. You rightly note that human resources are a
critical part of achieving ambitious goals within a complex IT
environment. If confirmed I will work to address these issues.
tax reform
Question. Mr. Mnuchin, when it comes to tax reform, it is easy to
propose lowering rates and broadening the base. But it clearly matters
how one broadens the base. There are provisions in the tax code that
have broad bipartisan support, and if repealed, could damage our
economy, get rid of jobs, and harm communities in Oregon and across the
country. For example, the low-income housing tax credit has financed
nearly 3 million affordable homes for low-income working families since
its creation in the last comprehensive tax reform, and sustains nearly
100,000 jobs annually. Are you committed to ensuring that the low-
income housing tax credit program is maintained as a part of tax
reform?
Answer. President Trump's objective is to pass tax reform that
grows the economy and benefits all Americans. If confirmed, I look
forward to working with Congress on a review of the housing tax credit
programs.
Question. The President's tax reform plan would cut the business
tax rate to 15 percent for both corporations and pass-throughs--such as
partnerships, sole proprietors, and S corporations. But then the reform
proposal states that the distribution from ``large'' pass-throughs
would be treated as dividends and taxed again.
Are you saying that large pass-through businesses would be treated
as corporations--taxed once at the entity level and then again at the
owner level? If not, can you please clarify what you mean when you say
that ``large partnerships will be taxed''? How would you define
``large''? Would you provide any exceptions such as for Master Limited
Partnerships (MLPs) or Real Estate Investment Trusts (REITs)?
Answer. The President has previously stated his support for tax
reform that benefits all Americans. If confirmed, I look forward to
work with you to ensure that no individual or business organization is
unfairly treated in comparison to others.
Question. Here's a scenario for you to consider. A salaried
employee rather than taking her income as wages instead sets up a sole
proprietorship that provides labor services to the company. That
employee of the company now pays a 15-percent tax rate instead of
paying a 33-percent tax rate. That's an advantage for the taxpayer. How
would the President's tax plan prevent gaming like this?
Answer. If confirmed, I will work with Congress to ensure that we
prevent people from ``gaming'' the system.
Question. During the confirmation hearing before the Finance
Committee, when questioned by the ranking member about how ACA repeal
would take premium tax credits away from the middle class to fund
payroll and investment tax cuts for the wealthy, you said that we had
to look at tax reform as a whole. But according to an analysis by the
Tax Policy Center (TPC), the Trump tax reform plan by itself would also
raise taxes on middle-class families with children, in large part
because it would repeal the personal exemption for children and force
single parents with children to file as singles and so forfeit the more
generous standard deduction they currently receive. Please note that
the Trump proposal does this while also delivering massive tax cuts to
the highest-income taxpayers and businesses. TPC's analysis also notes
that the President's proposed child care deduction and tax credit fails
to compensate families for these other lost tax benefits.
Mr. Mnuchin, does the President intend to raise taxes on middle-
income families on net?
Answer. President Trump made it clear throughout the campaign that
his commitment was to tax relief for the middle class. If confirmed, I
will work with President Trump and Congress to ensure that middle-class
families are not further burdened by higher taxes.
Question. You keep saying that a middle-class tax cut is the
centerpiece of your tax reform agenda--what middle-class taxes do you
actually intend to cut?
Answer. President Trump has outlined a bold tax reform agenda that
will include relief for the middle class. If confirmed, I will work
with the President to implement these reforms for the American middle
class.
Question. Will these middle-class tax cuts make up for the premium
tax credits that will be lost to ACA repeal?
Answer. If confirmed, I will work with the Secretary of Health and
Human Services to determine the economic impact of any changes to ACA.
Question. During the campaign, the President often expressed his
intention to bring jobs and investment back to low income, high
unemployment rural communities, and urban areas. Over the last 15
years, the New Markets Tax Credit has demonstrated that it is an
important tool for revitalization. As the administration assembles its
tax reform package, I hope you will take a serious look at making the
New Markets Tax Credit permanent.
Since the credit was launched in 2001, $38 billion in direct New
Markets Tax Credit investments were made in businesses and these New
Markets Tax Credit investments leveraged over $75 billion in total
capital investment to businesses and revitalization projects in
communities with high rates of poverty and unemployment.
This financing has resulted in the creation of 750,000 jobs and the
financing of commercial and industrial facilities, day care and health-
care centers, mixed use facilities, and small business loans, all of
which improve local economies and the quality of life in distressed
neighborhoods.
In Oregon, $843 million in New Markets Tax Credit capital has
leveraged a total of $1.73 billion in financing for a range of projects
and created nearly 15,000 construction jobs and more than 16,000
permanent jobs.
For example, Chaucer Foods created about 73 new jobs in Forest
Grove, OR with the opening of a new freeze-dried food processing
facility.
NMTC financing helped Advantage Dental, one of Oregon's largest
dental health care providers for low-income persons within the State
serving over 200,000 patients, finance 7 additional dental clinics
providing dental services to the uninsured and low income individuals.
In Ontario, OR, $4 million New Markets Tax Credit allocation
facilitated the purchase and necessary improvements of a factory for
Fry Foods, Inc., bringing needed jobs to the area.
And in Dillard, OR, the NMTC helped Roseburg Forest Products, a
manufacturer of wood products, obtain working capital for capital
improvements needed to remain competitive and retain critical
manufacturing jobs. The influx of working capital allowed RFP to
install new equipment and expand its facilities so that RFP can
capitalize on the timber industry's recovery and retain 971 jobs.
The New Markets Tax Credit has bipartisan support, and has been
very successful in leveraging private sector capital for investment on
some of the poorest urban and rural areas of the America. It will be a
valuable tool in your efforts to bring jobs back to communities left
behind by the economic recovery. Do I have your commitment that you
will work with me to make permanent this important program?
Answer. I share your commitment to bring back jobs to these
communities that have been so gravely affected by economic conditions
for which they had no part in creating. If confirmed, I will work with
you to make sure that the poorest and rural areas of America are no
longer left behind.
debt ceiling
Question. The current debt limit suspension is set to expire March
17th. The responsible course for the new Congress would be to raise the
debt limit without drama or brinksmanship. Unfortunately, if recent
history is any indication, we may once again hear calls to block
raising the debt limit. With extraordinary measures, the Treasury
Secretary can lengthen this time to possibly summer, if necessary.
What are your plans for dealing with the debt ceiling?
Answer. As I have stated, and as has been the position of prior
Secretaries of the Treasury, honoring the full faith and credit of our
outstanding debt is a critical commitment.
If confirmed, I look forward to working with President Trump and
Congress before the mid-March deadline.
Question. Do you support using extraordinary measures, if
necessary, while the White House and Congress pursue negotiations to
raise the debt limit?
Answer. I do support using whatever powers are within the Treasury
to honor our commitments.
Question. Would you be willing to work with the bipartisan group in
Congress and the financial institutions that have supported the
collection of meaningful beneficial ownership information by
authorities at the time of incorporation?
Answer. If confirmed, I will work with your office to understand
this issue.
mnuchin foundation
Question. Do you maintain this foundation maintained with your
father and your former wife?
Answer. Yes.
Question. Based on publicly available filings, it appears that
despite making more than $1.5 million in 2003, your foundation failed
to distribute the required 5 percent to charities. Could you explain
why you chose to not give those funds to charity as required by law?
Answer. The Foundation did not earn more than $1.5 million in 2003,
nor did its fair market value increase by that figure. A comparison of
the originally filed 2002 return and the amended 2003 return actually
shows a decrease in fair market value of approximately $150,000. In
addition, the Foundation had realized income in 2003 of $37,775.
A foundation is required to distribute 5% of the average fair
market value of a given fiscal year by the close of the next fiscal
year. Therefore, the distribution requirement related to 2003 needed to
be made by the close of the 2004 fiscal year. In 2004, the Foundation
was required to distribute $259,917 related to fiscal year 2003;
however, it only distributed $221,034. The short-fall of $38,883 was an
oversight by the Trustees and was not done intentionally. Please note
that in the approximately 19 years that the foundation has been in
existence this was the only year the Foundation failed to meet that
requirement.
Question. By failing to make the required minimum distribution from
your foundation, you would have been required to pay an excise tax
penalty. Later in 2003 it appears your foundation filed an amended tax
return that revalued one of your investments in the ESL Limited hedge
fund, the effect of which was to reduce the amount subject to the
excise tax penalty by more than $40,000. This revaluation appears
potentially inconsistent with your accounting in other years' filings.
Could you please explain this discrepancy?
Answer. The originally filed return in 2003 used an incorrect fair
market value for ESL Limited. When the error was discovered, the return
was amended.
house blueprint
Question. The House Blueprint resembles a 20% subtraction method
VAT. A 20% subtraction method VAT is equivalent to a 25% credit invoice
method VAT, the type used in Europe. Wouldn't that mean that the U.S.
would go from having the highest corporate income tax rate in the world
to the second highest VAT rate on consumers in the world (without
taking into account sales and use taxes at the State and local level)?
Do you think that would be wise?
Answer. If confirmed, I am committed to working with Congress on a
tax reform proposal that increases the competitive position of our
Nation by encouraging growth in investment, and simplification for
personal taxes.
Question. Some proponents of the House Blueprint argue that the
U.S. dollar will immediately strengthen to offset the impact of border
adjustments. Even if true (which many experts doubt), are there
downsides that should be considered? For example, if the U.S. dollar
suddenly appreciates 25%, doesn't that mean that there is a sudden
wealth transfer away from U.S. persons with foreign assets (denominated
in dollars) to foreign persons with U.S. assets (denominated in foreign
currencies)? Won't this harm U.S. multinationals with large foreign
subsidiaries, other U.S. investors with significant foreign holdings,
and debtors with dollar-denominated debt? Aren't the Chinese likely to
be the largest beneficiaries of this wealth shift since they hold large
amounts of U.S. debt and assets?
Answer. If confirmed, I am committed to working with Congress to
craft the best possible tax reform plan to serve all Americans.
Question. Also, won't inflation in the value of the dollar
discourage foreign direct investment, by making purchases of U.S.
assets relatively more expensive for foreign buyers?
Answer. If confirmed, I am committed to working with Congress to
craft the best possible tax reform plan to serve all Americans.
Question. Some economists have argued that there will be no impact
on trade of the border tax adjustments in the House Blueprint because
exchange rate changes will neutralize their effect. Several of the
money center banks that are close to foreign currency markets have
raised doubts that these economic assumptions are true in the real
world. For example, Morgan Stanley said that a 25% increase in the
dollar ``would be extreme to say the least'' and is not very likely to
happen. They said, ``we are skeptical of a full offset, particularly on
a short time horizon, as it usually takes a long time for exchange
rates to fully react to changes in trade flows.'' Do you share their
concerns that exchange rate adjustments may not fully offset the trade
effect of the border tax adjustments?
Answer. If confirmed, I am committed to working with Congress to
craft the best possible tax reform plan to serve all Americans.
Question. For background, there are several reasons exist why
exchange rate adjustments may not resolve these trade barrier concerns.
First, it is unclear whether these adjustments would be instantaneous.
It may take time for exchange rates to adjust to changes in trade
flows. Second, a number of cases exist where foreign currencies or
prices of commodities are pegged to the dollar and thus may not be
flexible, in the short or long term, for exchange rate adjustment.
Third, assuming exchange rates adjust to offset the effects of border
adjustments across the economy as a whole these changes would be
general in nature and would not account for differences between
industry sectors or business circumstances. A sector that was impacted
more heavily than the economy could remain disadvantaged. Fourth, it is
important to note that, in the House Blueprint, the border tax
adjustment for imports is not equivalent to the adjustment for exports.
This disparate treatment could affect the exchange rate adjustment that
theoretically should occur with full border tax adjustments. Finally,
other factors affect exchange rates that could have countervailing
effects. These include, interest rates, levels of inflation, growth in
public debt, economic capacity, and political and economic stability.
Under the Blueprint, no tax would be imposed on exports.
Consequently, we would be ceding the right to tax foreign income from
value-creating activities in the United States. Because we have
relinquished our right to tax such income, would other countries react
to this change by adopting similar tax systems or otherwise increasing
taxes on U.S. companies with respect to such income? Wouldn't you
expect foreign countries to ``make up the difference'' by taxing U.S.
multinationals overseas income as was done in the EU state aid cases?
Answer. If confirmed, I am committed to working with Congress to
craft the best possible tax reform plan to serve all Americans.
Question. Many trade law experts believe that the border adjustable
tax embodied in the House Blueprint is not WTO compliant. Are you
concerned that it would be challenged by our trading partners and
subject U.S. companies to potential retaliation of a magnitude we
haven't seen before?
Answer. I agree with the President that we have to take an America
First approach to everything we do. This is another issue that will
need to be evaluated fully before proceeding.
Question. The General Agreement on Tariffs and Trade (GATT) imposes
several limitations on the ability to provide border adjustments to a
tax. First, as indicated in the ``Illustrative List of Export
Subsidies,'' relief of any ``direct'' tax (under a border adjustment)
will constitute a prohibited export subsidy. For this purpose, a direct
tax is a tax imposed on all forms of income, wealth, and ownership of
property. Second, while relief of an indirect tax through a border
adjustment generally would be allowed, the amount of the rebate cannot
exceed the amount of tax levied on the same good or service when sold
for domestic consumption. Finally, the border adjustment applicable to
imports is subject to ``national treatment'' requirements, generally
requiring that imported and domestically produced goods and services be
treated equally once the foreign goods have entered the market. Are you
concerned that the business cash flow tax under the House Blueprint
would be subject to challenge at the WTO (1) as a direct tax, (2)
because the deduction for wages could cause the resulting rebate to
exceed taxes paid on the exported goods, and (3) that national
treatment requirements will be violated because a deduction would be
allowed for wages for work performed in the United States but not with
respect to imported goods?
Answer. If confirmed, I am committed to working with Congress to
craft the best possible tax reform plan to serve all Americans.
Question. As proposed, the import border tax adjustment proposed in
the House Blueprint would be difficult to enforce against foreign
sellers who sell directly to U.S. consumers (similar to States'
difficulties in collecting sales and use taxes on sales made by out-of-
state sellers to in-state consumers)? Is it possible to close this
loophole effectively? Wouldn't any enforcement mechanism require us to
abrogate all of our tax treaties?
Answer. If confirmed, I am committed to working with Congress to
craft the best possible tax reform plan to serve all Americans.
Question. I'm concerned, as the Joint Tax Committee staff has
previously stated, that if we replace our current income tax with a
consumption-type tax like the House Blueprint, our current tax treaty
system may not ``be still applicable or desirable.'' Among the issues
that would potentially need to be rethought under existing treaties
are: (1) would the permanent establishment rules need to be changed or
scrapped in a shift to a destination-based system; (2) whether foreign
countries will refuse to give credit for U.S. taxes because the system
is no longer an income tax; and (3) will reduced withholding rates
continue to be respected? Until these and other similar issues are
resolved under each existing treaty, won't taxpayers face considerable
uncertainty?
Answer. If confirmed, I am committed to working with Congress to
craft the best possible tax reform plan to serve all Americans.
retirement savings
Question. Today the United States is in the midst of a retirement
savings crisis. In 2013, the National Institute on Retirement Security
estimated that the retirement savings deficit is between $6.8 and $14.0
trillion. Furthermore, the Employee Benefit Research Institute reports
that in 2016, 26 percent of all workers surveyed had less than $1,000
in retirement savings and 68 percent of workers with household income
less than $35,000 a year had less than $1,000 in retirement savings.
What would you do as Treasury Secretary to address our country's
retirement savings crisis?
Answer. Senator, you rightfully raise a concern about underfunded
retirement savings of many Americans. If confirmed, I look forward to
exploring this issue further with you.
Question. Last September I released a discussion draft titled the
Retirement Improvements and Savings Enhancements (RISE) Act of 2015.
This bill would among other things encourage retirement savings. For
example, the bill would allow employers to make matching contributions
to their 401(k) retirement plans on behalf of their employees who made
student loan payments but were unable to afford to also contribute to
their 401(k) plans. It is difficult for many Americans, especially
younger workers, to save for retirement while also paying off their
student loans. However, those employees miss out on essentially ``free
money'' by not taking advantage of employer matching contributions to
401(k) plans.
Do I have your commitment that you will work with me to enact this
important provision and help young people save for retirement?
Answer. If confirmed, I look forward to working with you on
solutions to encourage retirement savings.
Question. A recent Wall Street Journal article reported that ``the
largest generation in U.S. history has to start pulling its retirement
money this year.'' This is because of the required minimum distribution
(RMD) rules that generally require participants to begin taking
distributions from their retirement plan at age 70\1/2\. The policy
behind this rule is to ensure that individuals spend their retirement
savings during their lifetime and not use their retirement plans for
estate planning purposes to transfer wealth to beneficiaries. However,
the age 70\1/2\ was first applied in the retirement plan context in the
early 1960s and has never been adjusted to take into account increases
in life expectancy. To address this issue, the RISE Act would increase
the RMD age from 70\1/2\ to 71 in 2018. The age would be increased
further to 72 in 2023, 73 in 2028 and, thereafter, would be adjusted in
a manner proportional to increases in life expectancy. Do I have your
commitment that you will work with me on this issue?
Answer. If confirmed, I look forward to working with you on
solutions to encourage retirement savings.
Question. I'd like to get your views on the so-called ``mega-
IRAs.'' As of 2011, 2,000 to 5,000 taxpayers had aggregated IRA
balances over $5 million, which also include Roth IRAs. The estimated
fair market value of their Roth IRAs totaled $8-$13 billion as of 2011.
There are even press reports of executives in the high tech industry
with Roth IRAs with balances $30 million to more than $90 million. Yet
contrast that with the account balances of most Americans. In 2013, the
median IRA account balance was $25,438.
I just don't think that's fair. Do you? My bill, the RISE Act,
includes some
common-sense reforms to address the mega-IRA issue. For example, the
bill would prohibit further contributions to a Roth IRA if the total
value of an individual's Roth IRA exceeds the greater of (i) $5 million
or (ii) the balance as of December 31, 2016. Do I have your commitment
to work with me to create more fairness in our retirement system and
address the mega-IRA issue?
Answer. Senator, I understand your concern. I look forward to the
opportunity of further exploring this issue with you.
Question. One area where I see a lot of unfairness in our tax
system is executive compensation. According to the Economic Policy
Institute, top CEOs were paid 276 times more than the typical worker in
2015. Do you think that's fair? In many ways, the tax code encourages
employers to pay their employees large sums of money on a tax-preferred
basis. Do you agree? Do you commit to working with me to shut down
executive compensation loopholes?
Answer. I am committed to work with Congress to ensure that the tax
code is fair. I believe these issues need to be addressed in the
context of broad tax reform. As to the issue of what executives are
paid, I believe this is for shareholders to determine. I don't think it
is the proper role of the Federal Government to prescribe limitations.
Question. There are more than a thousand multiemployer pension
plans around the country, and millions of Americans rely on them for
economic security in retirement. But many of those pension plans are in
dire financial straits. With the livelihoods of so many Americans on
the line, it's vital that Democrats and Republicans come together to
find solutions to this crisis. Do I have your commitment that you will
work with me to address the multiemployer pension crisis?
Answer. If confirmed, you have my commitment to work with you to
find solutions to the multiemployer pension crisis.
Question. Since 2006, an enhanced income tax deduction has allowed
family farmers, ranchers, and forest landowners to get an important tax
benefit for donating a conservation easement on their land. This
temporary provision was made permanent by the PATH Act on December 18,
2015.
This enhanced tax incentive boasts a long history of bipartisan
congressional and administration support. It is clear that policy
makers value the conservation of land protection by private landowners
through the charitable contribution of conservation easements.
Unfortunately, the availability of significant tax benefits can also
attract those who would abuse the provision.
Recently, the Treasury Department and IRS have become aware of
certain syndicated conservation easement transactions that purport to
give so-called ``investors'' the opportunity to obtain charitable
contribution deductions in amounts that significantly exceed the amount
invested.
On December 23, 2016, Notice 2017-10 was issued alerting taxpayers
and their representatives that certain, very specific syndicated
conservation easement transactions are tax avoidance transactions
requiring those who participate in such transactions to make a
disclosure to the IRS. Congress provided these reporting tools to the
IRS to help identify and deal with abusive transactions, such as those
covered in the notice.
Members of Congress and the land trust community support this
effort by Treasury and the IRS to protect the integrity of this
important conservation program. Will you commit to work with this
committee to protect the integrity of the conservation easement
program? Will you keep this committee informed about these abuses and
whether additional enforcement tools are needed to curb these abuses?
Answer. If confirmed, I commit that I will work with the committee
to protect the integrity of the conservation easement program and will
keep the committee informed about potential abuses and enforcement
tools that are needed.
tobacco tax
Question. In 2009, Congress raised tobacco taxes to help fund the
State Children's Health Insurance Program. The taxes on cigarettes and
roll-your-own tobacco were raised to the equivalent of $10.07 per
carton. At the same time, the tax on pipe tobacco was raised only
marginally--to $1.15 per carton equivalent.
In July 2014, this committee held a hearing on ``Tobacco: Taxes
Owed, Avoided, and Evaded.'' At that hearing, we received testimony
that the Federal Treasury had, to that date, lost over $2 billion due
to tax evasion by certain tobacco companies who responded to the 2009
tax increase by selling roll-your-own tobacco in bags mislabeled as
(and thus taxed as) ``pipe'' tobacco.
According to GAO, sales of pipe tobacco rose over 740% following
the tax increase while sales of roll-your-own fell by more than 80%.
Clearly the number of pipe tobacco smokers in our country did not
increase more than 7-fold during that same period.
In 2010, the Alcohol and Tobacco Tax and Trade Bureau issued an
Advanced Notice of Proposed Rulemaking to stem this abuse. It extended
the comment period in 2011. Now, running on 6 years later, TTB has yet
to issue the Proposed Rule, despite the fact the Administrator of TTB
testified at our July 2014 hearing, that ``[w]e are going to air a
rulemaking in January [2015].'' Will you assure this committee that the
Proposed Rule will be finally issued expeditiously if you are
confirmed?
Answer. If confirmed, I will work with the committee on the
proposed rule.
mnuchin rule
Question. Every time an American earns even $1, a Medicare tax is
taken out to fund the program. However, in 2015, congressional
Republicans--as part of their reconciliation bill--decided that the
wealthy should see that tax cut. That means multimillionaires who still
earn a paycheck--you may know a few--will get a tax cut, while
teachers, nurses, police officers, firefighters, and other middle-
income workers will continue to pay full freight. Do you support that
policy?
That doesn't seem to square with your comments about ``no absolute
tax cut'' for the rich. To be clear, this tax cut for the wealthy
shortens the life of the Medicare program by 3 years. Am I
understanding you correctly that you support a tax cut for the wealthy
at the expense of the Medicare program?
Would you advise President Trump to veto any legislation that
reduces revenue going into the Medicare Trust Fund in order to maintain
the solvency of the Medicare program?
Answer. The President is committed to protecting the integrity of
Medicare. He also is committed to addressing the negative economic
effects of many of the provisions, including tax provisions, enacted as
part of the Affordable Care Act. If confirmed, I will work with
Congress to ensure that we meet these objectives.
Question. To move forward on tax reform, Congress needs to be
streamlining rules to stop the wealthy and well-connected from gaming
the system while making sure working Americans get a fair shake. On
that basis, please answer the following questions.
You have said that the President's tax reform proposal will not
include an absolute tax cut for the wealthy. Is this correct?
Will the President's tax proposals keep the tax system at least as
progressive as it is currently?
If it's done right, tax reform can put more money back into the
pockets of hardworking Americans, so that they can meet their bottom
line. How will you cut taxes for working families without adding to
America's debt?
You have said that you want to lower marginal tax rates. You have
also said that you are considering capping or repealing most itemized
deductions. Is this correct?
This will result in a net tax cut for the highest-income taxpayers.
Someone making $10 million a year has maxed out most of their tax
deductions, but they will benefit tremendously from the marginal rate
cut. Doesn't this seem to go against your pledge that there will be no
tax cut for high-income earners?
Answer. As I noted earlier, the President supports tax reform that
will grow the economy and put more money in the pockets of hardworking
Americans. If confirmed, I will work with Congress to maintain an
appropriate level of progressivity in the tax code.
president's tax returns
Question. President Trump has said many times that his tax returns
are under audit. The President has also said he will not divest himself
of his investments and the businesses he owns, but rather transfer
control to his family. As the President's campaign Finance chairman who
became the Treasury Secretary nominee, how can the American people
ensure that the audit of the President's tax returns and his business
dealings will be free of political interference?
Answer. If confirmed, I am committed to uphold the laws of the
United States and to defend the Constitution. That pledge will extend
to all the duties I would undertake including maintaining the
relationship of the Treasury and the IRS.
Question. Senator Wyden introduced legislation earlier this month
that would require all sitting Presidents to release their most recent
3 years of tax returns to the Office of Government Ethics. If the bill
becomes law and you are confirmed, will you make Mr. Trump's tax
returns public despite the continued objections from your future boss?
Answer. If confirmed, I am committed to uphold the laws of the
United States.
tax reform process
Question. Mr. Mnuchin, the House is already drafting the Republican
tax reform proposal, which includes some brand new ideas such as their
border adjustability tax. There are legitimate concerns this new tax
may rest solely on the shoulders of consumers. Regardless, the House
plans to rush this new tax through under special procedural
protections, allowing them to do so in a partisan way and with very
limited debate. Do you think President Trump's voters deserve to have a
proper vetting and regular order process before any new tax goes into
place on the things they buy?
Answer. If confirmed, I am committed to working with Congress to
craft the best possible tax reform plan to serve all Americans.
u.s. territories
Question. There have been press articles regarding the activities
of ``Best Sunshine'' corporation in the Commonwealth of the Northern
Mariana Islands. Would you please review these articles and let me know
what action, if any, should be taken by the Treasury Department and
other Departments?
Answer. If confirmed, I will ensure that the Department reviews
this information and gets back to you.
currency, the u.s. dollar, and sanctions toward russia and cuba
Question. Mr. Mnuchin, if confirmed, it will be up to you to
administer the Nation's laws that relate to combating currency
manipulation. It will also be your job to represent the United States
at the IMF, the OECD, the G7 and the G20. The Nation will rely on you
to use these fora to work with other countries to ensure that global
currencies are valued by the markets, not distorted by government
intervention.
The President, before and after the campaign, has promised that he
is going to instruct you to label China a currency manipulator. This
committee has put into law several important pieces of legislation to
defend American jobs by combatting currency manipulation. While we all
agree that China has in the past manipulated its currency--and may well
do so in the future--China appears to have stopped intervening to
devalue its currency in recent years and may even be taking steps to
prevent depreciation.
Do you disagree with that assessment?
Answer. If confirmed, I intend to review the issue of Chinese
currency manipulation.
Question. It is possible that the incoming President could issue an
Executive Order instructing you to name China a currency manipulator
even though China doesn't meet the statutory criteria as a manipulator.
It seems to me that taking this action would undermine your credibility
and the credibility of the United States when we seek to take on
currency manipulation in the future. Are you advising the President to
avoid taking actions that undermine the credibility of the United
States?
Answer. Currency manipulation is a serious infraction of free trade
principles and needs to be effectively addressed. As Treasury
Secretary, I will ensure that we defend American jobs by combating
currency devaluation utilizing the reporting and monitoring functions
of the Treasury and legislative processes established by Congress.
Question. The President in recent days described the dollar as
being too strong, and there were also reports that a senior advisor to
the Trump administration expressed concern at Davos about the strength
of the dollar. Shortly after those remarks were reported, the value of
the dollar declined. As Treasury Secretary, will you use public
statements as a tool to influence the value of the dollar?
Answer. As Treasury Secretary, I will maintain the position that
long-term, a strong and dependable dollar is in the best interests of
the United States, while recognizing that at times over the long-term,
that may not be the case.
Question. Mr. Mnuchin, the outgoing administration put in place
economic and trade sanctions to respond to Russia's actions to
undermine the security and territorial integrity of Ukraine. These
sanctions include cutting off U.S. trade with the Crimea region of
Ukraine after Russia's annexation.
Do you agree with me that the United States must hold Russia
accountable for such actions, and if confirmed, would you support
continuing these sanctions as a counter to Russian aggression?
Answer. I agree that the United States must hold Russia accountable
for its actions, and if confirmed I will continue to support and
enforce the existing sanctions against Russia to the fullest extent.
The President has indicated he would consider sanctions relief in
return for other commitments from Russia.
Question. Mr. Mnuchin, the outgoing administration has taken a
number of steps to ease the decades-long trade and economic sanctions
imposed on Cuba. Those sanctions have had no positive results for the
goals of the United States, and I strongly support the Obama
administration's recognition that it is time for a new strategy--
engagement--to make Cuba a more free and open society. In addition,
there is real economic opportunity for U.S. producers in Cuba. A study
by the International Trade Commission released last year points to
particular opportunities for American agriculture, including dairy and
wheat from the Pacific Northwest, and for goods manufactured in
America, like construction machinery and building materials.
Given the lack of progress under the old strategy, and the
substantial opportunities for U.S. producers, do you support past and
future easing of the sanctions?
Answer. If confirmed as Secretary, I will implement and enforce
Cuba sanctions pursuant to their statutory construct.
financial crimes enforcement network (fincen)
Question. According to news reports, U.S. law enforcement and
intelligence agencies, including the Treasury Department's Financial
Crimes Unit, are conducting an investigation into possible links
between Russian officials and at least 3 associates of President Trump.
If confirmed as the Treasury Secretary, how will you ensure that the
Treasury Department Financial Crimes Unit's investigation will be free
of political interference by the President or others in his
administration? What measure will you put in place to ensure that the
financial crimes unit fully assists the FBI's investigation,
notwithstanding any potential ties to the President?
Answer. It is critical that all law enforcement investigations
proceed without political interference from either the Executive or
Legislative branches of the government. If confirmed, I will direct the
leadership at FinCEN to continue assisting with every law enforcement
investigation that it is supporting. I will not attempt to influence,
direct, or prevent any outcome to a law enforcement investigation other
than what the facts and evidence support. And I would direct my staff
to do the same.
false claims act
Question. You have been on the board of Kmart and Sears,
respectively, since 2003. During that time, there have been four False
Claims Act complaints filed against these companies contending that
Kmart pharmacies defrauded Federal health-care programs, including
Medicaid and Medicare. Three of these complaints have been settled. The
complaints in these three cases alleged that Kmart offered improper
incentives to beneficiaries to fill their prescriptions at Kmart. The
complaint in the fourth case alleges that Kmart overcharged Federal
health programs for drugs purchased by beneficiaries through its
pharmacies. All four complaints allege that the Kmart pharmacy policies
in question were approved at the corporate level. What was your role,
as a board member, in reviewing and approving Kmart pharmacy policies?
Did you have any role in the review or approval of the Kmart pharmacy
program that is the subject of the pending False Claims Act litigation?
Answer. The Kmart-Sears board of directors did not review the
policies or practices at issue in the False Claims Act. Those policies
and practices were conceived and implemented by Kmart Pharmacy
executives. Kmart elected to settle these False Claim Act lawsuits
without conceding any liability of wrongdoing whatsoever.
sanctions enforcement
Question. As Secretary of the Treasury, you will oversee the Office
of Foreign Assets Control (OFAC) which is responsible for enforcement
of U.S. sanctions against persons and entities, including those in
Russia. Sanctions currently exist related to Russia's actions in
Ukraine. President Trump's business enterprises have reportedly
included investments and overtures to Russian investors. What measures
will you put in place to ensure that OFAC fully enforces U.S. sanctions
notwithstanding any business interests the President may have?
Answer. As I stated during my hearing, I intend to fully enforce
the existing sanctions imposed against Russia to the maximum extent. To
the extent OFAC conducts Russia-related sanctions enforcement
activities and investigations I will not, nor will any political
appointee in the Treasury Department under my watch, attempt to
influence, direct, or prevent any outcome to a law enforcement
investigation other than what the facts and evidence support.
Question. Analysis of the beneficial ownership of anonymous shell
companies place an important role in OFAC sanctions enforcement. There
have been numerous examples of terrorists, human traffickers, drug
cartels and other crooks abusing anonymous U.S. shell companies to hide
illicit assets and launder money with impunity. Last year I introduced
legislation to stop these abuses by requiring the disclosure of
beneficial ownership information to each State's Secretary of State or
law enforcement at the time those entities are created.
The law enforcement community, including the Federal Law
Enforcement Officers Association, Fraternal Order of Police, National
Association of Assistant U.S. Attorneys, and the National District
Attorneys Association, have all called on Congress to pass this type of
legislation. Similarly, financial institutions of all sizes--including
the Clearing House Association and the Independent Community Bankers of
America--have urged the government to assist them in their customer due
diligence obligations by collecting beneficial ownership information at
the time of incorporation.
Do you agree that better enabling law enforcement to obtain the
identities of the beneficial owners of shell companies would assist
sanctions enforcement and help law enforcement to uncover and dismantle
criminal networks? Would you be willing to work with the bipartisan
group in Congress and the financial institutions who have supported the
collection of meaningful beneficial ownership information by
authorities at the time of incorporation?
Answer. I agree that law enforcement anti-money laundering efforts
face serious challenges if they are unable to determine the beneficial
ownership of the various companies and entities that utilize the U.S.
financial system. It can be a real vulnerability that various bad
actors, including terrorists and criminals, can exploit. I understand
that FinCEN recently passed new customer due diligence requirements
that are intended in part to address beneficial ownership
identification, and I will direct FinCEN to steadfastly enforce these
regulations. If confirmed I will be willing to work with the U.S.
Congress and the various equities impacted by beneficial ownership due
diligence requirements to address this challenge.
cfius
Question. As Secretary of the Treasury, you will oversee the
Committee on Foreign Investment in the United States (CFIUS). CFIUS is
authorized to review transactions that could result in control of a
U.S. business by a foreign person in order to determine the effect of
such transactions on the national security of the United States. A
substantial amount of indebtedness incurred by the President's business
enterprises is reportedly held by foreign entities. What measures will
you put in place to ensure that CFIUS is able to review any
transactions related to the President's business enterprises?
Answer. As Treasury Secretary, I will ensure that the Committee on
Foreign Investment in the United States (CFIUS) is fully authorized to
review transactions as deemed necessary and appropriate in conducting
investigations.
pbgc
Question. As Secretary of the Treasury, you will be on the Board of
Directors overseeing the functions of the Pension Benefit Guaranty
Corporation (PBGC). As discussed during the confirmation hearing, PBGC
has already been engaged with Sears in actions to try to preserve the
viability of the Sears pension plan covering an estimated 200,000
employees. While you have agreed to divest yourself of a number of
Sears-related holdings, your ethics agreement does not include
divestiture of your holdings in ESL Partners, which continues to have
substantial holdings in Sears. What measures will you take concerning
your personal involvement in any actions before the PBGC related to
Sears or any related entity?
Answer. If confirmed as Secretary of the Treasury, I will abide by
the advice of the ethics officials at the Department and will take all
steps necessary to comply with that advice.
relativity media
Question. While you were co-chairman of Relativity Media, did you
ever participate in any meetings intended to solicit potential
investors on behalf of Relativity? If so, how many such meetings did
you participate in between March 1, 2015 and May 29, 2015?
Answer. In the period you indicated, I may have sat in with
management in certain meetings to solicit potential investors in
Relativity. I do not have records that indicate how many meetings that
I may have participated in.
______
Questions Submitted by Hon. Chuck Grassley
Question. Over the last several years, we have seen an increase in
the amount of Foreign Direct Investment (FDI) in the United States,
specifically by China. In general, I do not oppose FDI, when people
outside the United States invest here and create jobs, I generally
think that is a very good thing. However, the rise of State Owned
Enterprises (SOE) which operate in many cases on behalf of their
governments, has changed the traditional FDI model. Today, we read
about Chinese SOE's buying American companies specifically to acquire
technology and intellectual property.
I know others in Congress have the same concerns I have about this
practice. Many of us are looking at modernizing the role of the
Committee on Foreign Investment or CFIUS to give it more defined powers
to review and potentially block investment by SOEs.
How do you view the rise of SOEs in the global economy over the
last decade?
Answer. If confirmed, I would take the responsibilities entrusted
to the Treasury Secretary under the Defense Production Act very
seriously and I look forward to working with Congress to review,
modernizing, and potentially expand the powers as needed in respect to
SOEs.
Question. In August, the Obama administration proposed regulations
that generally eliminate the ability of family farms and businesses to
use common valuation discounts when transferring interests to the next
generation. As proposed, these regulations could increase estate and
gift taxes for family owned farms and businesses by 30 percent or more.
I joined Senator Thune, Chairman Hatch and several others in a letter
to Secretary Lew calling for the withdrawal of the proposed
regulations. As Treasury Secretary, will you review these proposed
regulations and consider their withdrawal?
Answer. As was announced, following the inauguration, President
Trump issued a freeze on new regulations, in order to allow for further
review.
______
Question Submitted by Hon. Mike Crapo
Question. Mr. Mnuchin, as you may be aware, just a few weeks ago
the IRS released new regulations regarding the donation of land for
conservation purposes. And some of the stories we've seen about
improper appraisals and valuations of the land in some of these deals
do raise some concerns. On the other hand, we also know that the
government has a long history of overreaching and causing unintended
consequences when trying to address a very specific issue. Along those
lines, can I have your assurance that you will work with me to ensure
that IRS oversight efforts on these matters do not have the unintended
consequences of discouraging legitimate land and water conservation
efforts?
Answer. If confirmed, I commit that I will work with the committee
to review the integrity of the conservation easement program and will
keep the committee informed about potential abuses and enforcement
tools that are needed.
______
Questions Submitted by Hon. Pat Roberts
Question. Mr. Mnuchin, if you are confirmed, will you pledge to
work with this committee to implement systems, controls, and procedures
to make sure that the tax collection agency of the Federal Government
can never again be used as a weapon against political opponents of any
presidential administration?
Answer. If confirmed, I pledge to oversee a Treasury Department
that follows the laws enacted by Congress and respects the rights of
all taxpayers and organizations. I confirmed, I intend to work with the
administration to establish an efficient and simple tax code that will
provide equal opportunity to all and encourage growth and prosperity.
Question. What are your thoughts on how to make sure small business
also benefit from tax reform? Do you have a proposal under development
to create a lower business rate for pass-through entities? Are you
considering a bifurcated rate, depending on the size of the business
entity?
Answer. President Trump wants tax reform that benefits all
Americans. If confirmed, I look forward to working with Congress to
ensure that no individual or business organization is treated unfairly
in comparison to others.
Question. A 2007 Treasury study during the Bush administration
concluded that more-rapid write-offs of the cost of business investment
would spur investment and growth more efficiently and effectively than
cuts in the corporate tax rate. The reason was that cuts in the rate
would give a windfall reward to investments made in the past. But
improvements in cost recovery would apply to new investments. Also, as
you know, higher depreciation deductions up front would be made up by
reduced deductions and larger tax collections in the future. Do you
agree that rapid cost recovery is a particularly efficient way to
promote domestic investment?
Answer. I do agree that at times rapid cost recovery is an
effective way to promote domestic investment. Growth in private
business investment is a key driver of private sector job growth and
must be a component of successful tax reform.
Question. The new President's tax proposals would give
manufacturers an election to expense their capital investments, at the
price of the loss of the interest deduction. Is there any compelling
reason why such an election should be limited to manufacturers? How
about transportation companies or communications companies or farms or
extractive industries or others? Shouldn't tax reform eliminate narrow
tax provisions, rather than add to them?
Answer. President Trump's proposal during the campaign should be
viewed as our administration's strong kickoff in the discussion of how
to best reform the broken tax code. If confirmed, I will work with
Congress to craft the legislation in a manner that ensures maximum
fairness and economic growth.
Question. Like-kind exchanges (LKEs) are integral to the efficient
operation and ongoing vitality of thousands of American farms, ranches,
and businesses, which in turn strengthen the U.S. economy and create
jobs. LKEs allow taxpayers to exchange their property for more
productive like-kind property, to diversify or consolidate holdings,
and to transition to meet changing business needs because they are not
required to immediately recognize a tax gain or loss when they exchange
assets for ``like-kind'' property that will be used in their trade or
business--importantly, the tax on any gain is not forgiven, only
deferred. Although the use of LKEs has been allowed by the tax code
since 1921, they are often mischaracterized as a ``loophole,'' and some
recent tax reform proposals would limit or repeal the use of LKEs. This
would have a significantly negative impact on our economy by increasing
the cost of capital, slowing the rate of investment, and reducing
transactional activity, resulting in a decline in GDP by up to $13.1
billion annually, according to a recent economic study by Ernst and
Young.
Do you agree that farmers, ranchers, and businesses should continue
to be able to use like-kind exchanges for real and personal property in
order to operate efficiently, and to grow, create jobs and strengthen
the U.S. economy?
Answer. I agree that farmers, ranchers, and small business should
be able to use like-kind exchanges for real and personal property in
order to operate efficiently, create jobs, and strengthen the U.S.
economy.
______
Questions Submitted by Hon. Michael B. Enzi
Question. Our Nation is on an unsustainable fiscal path. The
Congressional Budget Office (CBO) makes it clear that if current laws
governing taxes and spending did not change, the United States will
face steadily increasing Federal budget deficits and debt over the next
30 years. In CBO's projections, Federal debt rises to 86 percent of GDP
in 2026 and to 141 percent in 2046--exceeding the historical peak of
106 percent that occurred just after World War II. The prospect of such
large debt poses substantial risks for the Nation and presents
policymakers with significant challenges. We need to take steps now to
reform our entitlement programs and our broken tax code--to lay the
foundation for long-term prosperity for all Americans.
As Budget Committee Chairman, I have been working to reduce the
deficit and Federal debt. How do you expect to get the economy back to
consistent 3- to 4-
percent annual growth?
Answer. President Trump's plan to get the economy growing at 3 to 4
percent is based on tax reform, regulatory reform, and negotiating
better trade deals.
Question. What role does tax reform play in revitalizing our
Nation's economy?
Answer. Tax reform is essential to revitalizing our economy.
Question. Do you support comprehensive tax reform or tax reform for
business only?
Answer. The administration supports comprehensive tax reform.
______
Questions Submitted by Hon. John Thune
Question. In the last Congress, Senator Wyden and I introduced the
Charities Helping Americans Regularly Throughout the Year Act or the
CHARITY Act for short. That legislation would make a number of
improvements to the tax code to help charities and foundation conduct
their charitable missions. But it is also based on the premise that
charitable giving in this country is fundamental to our society and
that Americans are among the most generous people in the world.
Mr. Mnuchin, our current tax code, for all its flaws and
complexity, seeks to encourage that generosity by allowing individuals
and businesses to deduct gifts to charitable organizations. Will you
join me and my colleagues in ensuring that tax reform legislation
preserves an effective incentive for charitable giving?
Answer. If confirmed, I will work with Congress to make sure that
tax reform preserves appropriate incentives for charitable giving.
Question. Last September, 40 of my colleagues and I wrote to
Treasury Secretary Lew to ask that he withdraw proposed regulations
relating to valuation discounts under the estate tax. We stressed that
if finalized, the proposed regulations would make it more difficult for
owners of family farms and businesses to pass their businesses on to
future generation. As a result, the proposed regulations would
significantly increase the estate-tax burden on family businesses. I am
hopeful that we will not see any final regulations on this issue coming
out of the Treasury Department today or tomorrow.
Mr. Mnuchin, may we have your commitment that once you are sworn in
as Treasury Secretary you and your staff will withdraw these valuation-
discount regulations? While I share the President-elect's desire to
repeal the estate tax, in the interim, I would further ask that before
any new regulations are proposed on valuation discounts the Treasury
Department conduct a thorough evaluation of the perceived abuses and
work with the small farm and business community to develop rules that
directly target the abuses without hindering the ability of the owners
to pass the business on to the next generation and keep it in the
family.
Answer. As you know, the President has issued a freeze on new
regulations. If confirmed, I will work with Congress on the issue of
valuation discounts such that it does not make it more difficult for
owners of family farms and businesses to pass their businesses on to
future generations.
Question. The Obama administration has been widely criticized for
the volume and breadth of regulations its agencies imposed on
Americans, and with good reason. In the tax space, the Treasury
Department and IRS have imposed some of the most far-reaching and
burdensome regulations, which has fallen particularly hard on
businesses in this country. The poster child for many is the recently
finalized debt and equity regulations under section 385. And, just
yesterday, with less than 48 hours left in office, the Obama
administration dropped 277 pages of proposed regulations on partnership
audit rules that will have a broad impact on pass-through businesses in
this country.
Mr. Mnuchin, as we work to fundamentally reform the current tax
code into a less complex system for collecting the Nation's tax
revenues, will you work with the Finance Committee to review the Obama
administration tax regulations and other guidance and withdraw those
that are unnecessarily burdensome or inconsistent with the law?
Answer. The President has stated his commitment to reforming the
tax code, and if confirmed, I will work with Congress on this issue.
Question. In addition to tax regulations, financial-services
regulations following the passage of Dodd-Frank have affected not just
Wall Street banks, but main street banks as well. These lenders play an
important role in the communities they serve providing access to credit
for small businesses, homeowners, and agriculture producers. In my home
State of South Dakota, if not for community banks, 36 of South Dakota's
66 counties would be without traditional banking services. Yet
compliance burdens for small- and medium-size banks continue to grow.
In South Dakota, since 2010, 17 community banks have merged or been
acquired.
In your testimony you discuss your experience in the financial-
services sector and, very appropriately, your commitment to careful
industry oversight. What approach will your Treasury Department take in
evaluating current and future financial-services regulations and the
impact they have on banks of varying sizes--and in particular community
banks?
Answer. I am of the view that taking a fresh look at all aspects of
the Dodd Frank legislation should be one of our highest priorities, and
if confirmed, I look forward to working with Congress on this important
priority. It is important that we have a regulatory environment that
support credit flows to all aspects of our economy, particularly in
rural and less populated areas, and that small- and mid-sized
institutions are not suffering from an inappropriate regulatory burden.
______
Question Submitted by Hon. Johnny Isakson
Question. The Internal Revenue Service has issued a number of
regulations, guidance documents, and notices over the last several
months. For example, on October 4, 2016, the IRS issued a revised
notice of proposed rulemaking (REG-163113-02) concerning the valuation
of interests in corporations and partnerships for purposes of estate,
gift, and generation-skipping taxes. On November 1, the IRS issued
Notice 2016-66 requiring taxpayers to submit additional information
regarding certain captive insurance transactions. This notice
originally set an effective date of January 30, 2017, although I was
pleased that the IRS agreed to extend this deadline by 90 days to allow
for consideration of feedback from taxpayers. Additionally, on December
23, 2016, the IRS issued Notice 2017-10, effectively prohibiting
certain types of syndicated conservation easement transactions by
designating them as listed transactions. I have heard from several of
my constituents who have questions or concerns about each of these IRS
actions and are interested in knowing whether they will be carried over
by the new administration.
If confirmed as Secretary, what would be your approach to
proceeding forward with regulations and sub-regulatory guidance issued
by the IRS or other Treasury Department agencies in the final months of
the outgoing administration?
Answer. On Day One, President Trump issued a freeze on new
regulations to allow for further review.
______
Questions Submitted by Hon. Dean Heller
Question. How many Nevada homes were in OneWest Bank's portfolio?
Answer. Because I am no longer employed by or affiliated with CIT
Group, I do not have access to this information.
Question. How many Nevadan's did OneWest Bank foreclose on while
you owned the bank?
Answer. Because I am no longer employed by or affiliated with CIT
Group, I do not have access to this information.
Question. How many Nevadan's did OneWest Bank provide assistance to
through loan modifications or forgiveness?
Answer. Based on public information published in the MHA Servicer
Assessment, in the period from 2009 to mid-2013 OneWest offered a total
of 101,000 modifications to customers nationally. This period commences
in the beginning of 2009 when the HAMP program commenced (which is
approximately when OneWest was acquired in March 2009). Based on the
percentage of loans modified nationally in the MHA Service Assessment
that are in Nevada being 2.1%, that would indicate that we would
reasonably estimate that OneWest modified 2,150 loans in Nevada in the
period from 2009 to mid-2013.
Question. Did OneWest Bank specifically target minority communities
in Nevada for foreclosures?
Answer. No. During my tenure, OneWest Bank completed fair lending
examinations (including examinations of our servicing and loss
mitigation activities) conducted by both the Office of the Comptroller
of the Currency (``OCC'') and the Consumer Financial Protection Bureau.
In addition, an OCC examination of the Community Reinvestment Act
compliance of OneWest Bank under my leadership found that our
``geographic distribution of loans [was] excellent,'' our performance
under the OCC's Lending Test was ``high satisfactory,'' both home
mortgage refinance and home purchase lending were ``excellent,'' and
our multifamily lending activities were ``good.'' Overall, ``the OCC
did not identify any evidence of discriminatory or other illegal credit
practices with respect to'' OneWest Bank.
Question. Was it an objective of OneWest Bank to foreclose on
Nevadans in order to receive compensation from the Federal Deposit
Insurance Corporation shared loss agreement?
Answer. No, it was not the objective of OneWest to foreclose on
Nevadans in order to receive compensation from the FDIC. We were
strongly incentivized to modify every loan we possibly could. As I
indicated in my testimony before the committee, anyone who asserts that
we profited from foreclosures over loan modifications does not
understand the issues.
Question. Why was OneWest Bank slow to reach out to distressed
Nevada homeowners to offer loan modifications or forgiveness?
Answer. OneWest was not slow to reach out--on the contrary, OneWest
has been singled out by housing advocates and others as one of the
earliest adopters of loan modification programs, before other banks
began modifying loans at scale. As the former executive director of
HOPE NOW noted in supporting my nomination, OneWest under my leadership
was one of the first banks to adopt principal reductions as a
modification option, and we were also one of the first banks to agree
to modify second mortgages, which were of particular concern in Nevada.
Question. How will you help Nevadans who lost their home during the
housing crisis become homeowners again?
Answer. As Treasury Secretary if confirmed, I will work with bank
regulators where appropriate to make sure that banks continue loan
modification programs.
Question. What will you be doing to help Nevadans who continue to
struggle to make payments on their mortgages?
Answer. I will work with your staff to discuss what tools, if any,
the Treasury may have to address this issue.
Question. During your confirmation hearing you mentioned several
Federal regulations that prevented you and OneWest Bank from offering
loan modifications. As the U.S. Treasury Secretary will you actively
fight to change some of the regulations you believe could help Nevada
homeowners who are currently struggling to stay in their homes?
Answer. The impediments I mentioned before the committee were not
Federal regulations per se, but contractual limitations in investor
agreements and Fannie Mae and Freddie Mac guidelines that limited the
ability of servicers to modify mortgage loans. I will work with the
bank regulators, where appropriate, to encourage and allow loan
modifications going forward.
Question. What reforms do you plan to undertake to protect lower-
income and minority neighborhoods from another housing crisis?
Answer. I favor developing a clear housing finance policy which
should include clarification of the role of the Federal Government in
lending and oversight of lending practices. I support the
administration's strategies that will promote economic growth which
will help drive demand for housing and support housing prices.
Question. What policies will you promote that will help boost home
values and ensure middle-class homebuyers have access to affordable
mortgage financing?
Answer. As I have mentioned previously, I am in favor of reforming
our housing finance policy to assure consumers access to mortgage
credit, while protecting the interests of taxpayers in Federal
programs.
Question. What initiatives will you propose that encourage the
development of affordable housing in Nevada?
Answer. As appropriate as Treasury Secretary if confirmed, I will
review affordable housing programs in Nevada and elsewhere.
Question. What specific changes to Dodd-Frank would be your top
priority, and do you believe that reforms will lead to economic growth
that will create more jobs?
Answer. My top priority for regulatory reform with Dodd-Frank is
addressing regulatory issues that limit banks' abilities to lend to
small and medium-sized business that will create economic growth and
create more jobs.
Question. Will you pledge that you will never allow taxpayer
dollars to ever be used to bailout failed large financial or Wall
Street firms?
Answer. I favor shifting the burden of risk to shareholders and
other creditors without the expectation that the Federal Government
will act to bail them out.
Question. What do you believe should be done with Fannie Mae and
Freddie Mac?
What is your vision for housing finance reform?
Answer. As I have previously mentioned, I am in favor of a clear
housing finance policy to benefit both homeowners and renters.
Important elements of my vision for housing finance reform include
increasing private sector participation and protecting taxpayers. The
passage of over 8 years since entering conservatorship combined with
the broad recovery in housing prices make this a very good time to
relook at the GSEs and adopt a clearer, long-term housing finance
policy. I look forward to having the opportunity to work with Congress
on this important goal.
Question. It's not a secret that I strongly oppose the Obama
administration's nuclear deal with Iran and expect action on that issue
from the incoming administration. Iran is a state sponsor of terrorism
that threatens Israel's right to exist, continues to test ballistic
missiles in violation of UN resolutions, and now has access to billions
of dollars that it can freely provide to terrorist groups.
What tools as Treasury Secretary will you use, whether it is
through the tax code or through sanctions, to hold Iran accountable for
its state sponsorship of terrorism and other illicit activities?
Answer. If confirmed as Treasury Secretary, I will commit to
enforce all sanctions or other tools that are in place with Iran to the
maximum extent allowable by law.
Question. I would like to discuss the IRS's abysmal service record.
For the 2015 filing tax season, only 38 percent of callers were able to
reach an IRS representative. Additionally, the IRS has not developed
any plans for a comprehensive customer service strategy to address
these problems. Last year, I asked Secretary Lew this question, but I
would like to understand from you, as the ultimate overseer of this
agency, how will you plan to improve this record?
Answer. As I mentioned in my testimony in the confirmation hearing,
I believe that the IRS is under-resourced to perform its duties. Once
in office, I would endeavor to work with the Commissioner to better
understand the deficits in the organization, which may well include
factors that contribute to the customer service issues that you note.
While it is an independent Bureau I would endeavor to work with the
Commissioner and Congress, as necessary, to improve the performance of
the IRS including advocating for additional resources, if necessary.
Question. I am deeply concerned about the continual reports of U.S.
companies relocating overseas. I believe this is another example of our
burdensome tax code hurting the U.S. economy. With the rest of our
foreign competitors lowering their corporate tax rates while
implementing a more competitive international tax system, the United
States is falling further behind in its ability to provide U.S.
businesses and workers the tools they need to compete in the global
marketplace. This is why I believe we need to address fundamental tax
reform, including overhauling the international tax code, immediately.
As a member of this committee, I have repeatedly called on the
committee to address this issue and am pleased to see they have held
several hearings in regards to international tax reform.
What policies do you believe are critical to address our outdated
international tax code?
Answer. Our tax and international trade policies must work together
to ensure that companies stay here in the U.S., create new jobs, and
return production to the United States. Our companies cannot be
competitive if our tax and trade policy encourages them to move
production outside the United States. It must be the objective of our
tax and trade policy to return those jobs to our shores.
______
Questions Submitted by Hon. Bill Cassidy
historic tax credit
Question. While the historic rehabilitation tax credit is
administered by the Department of Interior, the economic and fiscal
activity this incentive generates has positive impacts for our economy
as a whole, which you, as Treasury Secretary, will be helping to
oversee. Forty percent of historic tax credit projects are in smaller
communities of less than 25,000 people. My home State of Louisiana has
led the Nation in a number of projects that have been assisted by this
successful public-private economic development incentive, and I'm proud
to report it has been used in 33 towns and cities throughout my State,
including dozens of smaller communities. Furthermore, a number of
projects in smaller communities throughout Louisiana are currently
underway. The historic credit is a major generator of jobs and leads to
economic revitalization in main street communities, rural towns, and
downtowns. A study commissioned by the National Park Service found the
credit delivers $1.25 in new tax revenue for every $1.00 of credit,
which shows that on a dynamic basis, the program is more than paying
for itself.
As Treasury Secretary, will you give special attention to this
proven and successful public-private economic development incentive
that is having a very positive impact in smaller communities throughout
America and in the urban areas that
President-elect Trump spoke of reviving during the election?
Answer. If confirmed, I pledge to follow the community improvement
initiatives. President Trump is committed to a comprehensive tax reform
plan and, if confirmed, I will work with Congress to incorporate
proposals that will have a positive impact on the largest number of
Americans.
section 170(h)
Question. The tax code provides an incentive for the donation of
easements that preserve land. This incentive, which has facilitated the
protection of over 50 million acres of American land, was permanently
increased on a bipartisan basis in 2015. On December 23, 2016, without
the opportunity for public comment, the IRS and Treasury published
Notice 2017-10 that designates a very broad category of these donations
as ``tax avoidance transactions.'' Because the Notice does not
distinguish between legitimate donations and the instances of taxpayer
abuse, the Notice will chill land preservation donations and will
thwart this important congressional effort to join private resources
with a public incentive. This issuance of this Notice seems to fit into
the pattern of 11th hour regulations and actions taken by the Obama
administration across the board, without giving the incoming
administration an opportunity to review them.
Are you willing to delay the effective date of this Notice so that
a thorough review can occur?
Answer. On Day One, President Trump issued a freeze on regulatory
actions. If confirmed, one of my priorities will be to assess any
``11th hour'' regulations to ensure that they comply with President
Trump's policies.
______
Questions Submitted by Hon. Debbie Stabenow
Question. When countries break international law and artificially
undervalue their currency, it has real consequences for the United
States. Currency manipulation has harmed manufacturers in States like
Michigan and cost American workers millions of jobs. During
consideration of Trade Promotion Authority in 2015, I introduced an
amendment with my colleague, Senator Portman, to add clear language
requiring our trade agreements to include enforceable currency
provisions.
Will you commit to supporting the inclusion of strong and
enforceable currency provisions in future trade agreements?
Answer. Yes, I support the inclusion of strong enforcement
provisions in future trade agreements.
Question. What specific steps will you take on currency
manipulation issues?
Answer. Existing U.S. laws provide the procedures whereby the U.S.
Treasury is to evaluate the currency policies of foreign nations. If I
am confirmed, I will follow the procedures and recommend changes to
those procedures if needed.
Question. You have said trade reform is a top agenda item for the
incoming administration. As you know, the Treasury and Commerce
Departments work with the Office of the U.S. Trade Representative on
trade enforcement efforts. As I have stated before, if we don't toughen
enforcement of our existing trade agreements, then we're letting other
countries get away with illegal and abusive foreign trade practices and
gain an anti-competitive upper hand. I worked hard to make sure
President Obama's Interagency Trade Enforcement Center at USTR would be
made a permanent institution to enforce our trade agreements and
address unfair trade practices.
What specific steps are you going to take to enhance trade
enforcement?
Answer. Enforcement of commitments under international trade
agreements is critical. I will work closely with the Secretary of
Commerce, the Director of the White House National Trade Council and
the U.S. Trade Representative to ensure our trade agreements put
American interests first. and work to enhance trade enforcement as
appropriate.
Question. Will you continue to support the work of the Interagency
Trade Enforcement Center?
Answer. As indicated above, we will use whatever tools necessary to
enforce trade agreements.
Question. Last year, volunteer tax preparers helped return $74
million in refunds, including $22 million in EITC benefits, to nearly
92,000 Michiganders. They do this with an exceptionally high accuracy
rate--about 94 percent.
Do you support volunteer income tax preparation programs?
Answer. I will work with your office to review the issues
associated with volunteer income tax assistance grant programs.
Question. Will you support authorization of the Volunteer Income
Tax Assistance grant program?
Answer. I will work with your office to review the issues
associated with volunteer income tax assistance grant programs.
Question. The data shows that moderate- and low-income families
need a more effective and better-targeted tool so that the tax code
helps unlock homeownership for them. In Michigan, only 10% of
households below $75,000 claim the mortgage interest deduction--but
more than half of households above $75,000 do.
How do you propose we use the tax code so that it more effectively
promotes homeownership for more middle-class and lower-income families?
Answer. With comprehensive tax reform and housing reform, we will
work to promote home ownership for middle- and lower-income families,
as appropriate.
Question. Since 1917, the tax code has included incentives to
encourage taxpayers to engage in charitable giving to causes that
benefit their communities and causes that are important to them.
Do you support maintaining existing incentives for charitable
giving in the tax code, such as the charitable deduction?
Answer. Senator, I would generally support the traditional
attributes of tax policy related to charitable giving.
Question. Some tax reform proposals to date have suggested
eliminating Last In, First Out (LIFO) accounting. Many Michigan
businesses--large and small, publicly held and privately owned--rely on
the Last In, First Out (LIFO) accounting method. However, LIFO repeal
would result in a one-time realization of revenue and retroactively
punish taxpaying businesses that have complied with current tax law.
Do you support maintaining LIFO accounting?
Answer. As part of any comprehensive tax reform, we will study and
consider the impact of this issue.
Question. If confirmed, you will become the head of the Committee
on Foreign Investment in the United States (CFIUS)--an interagency
committee that serves the President in overseeing the national security
implications of foreign investment in the economy.
Do you believe the CFIUS process needs to be reformed?
If yes, are you committed to working with Members of Congress to
reform and modernize the CFIUS process to ensure all sectors of the
economy are represented?
Answer. As Treasury Secretary, I will ensure that the Committee on
Foreign Investment in the United States (CFIUS) is fully authorized to
review transactions as deemed necessary and appropriate in conducting
investigations.
Question. Another difficult issue you will play a leadership role
in if you are confirmed as Treasury Secretary is pensions. This is an
incredibly important issue to my State, particularly because we have
about 47,000 workers and retirees who have been paying into the Central
States Pension Fund, which is in serious trouble.
What is your position on the Multiemployer Pension Reform Act,
which Treasury is responsible for administering?
How do you propose to shore up our multiemployer pension system?
Answer. You have my commitment to work with you to find solutions
to the multiemployer pension crisis.
Question. Our tax code clearly provides too many loopholes that
allow companies and wealthy individuals to avoid paying their fair
share through tax planning.
What do you think is the best strategy for preventing tax reform
from creating new loopholes that companies and individuals will abuse?
How would the incoming administration's tax plan close loopholes?
Answer. As part of our overall plan for tax reform, we will
consider this issue, and I look forward to consulting with Congress on
the matter if confirmed
Question. I firmly believe that we cannot have a robust economy if
we do not grow things here and make things here.
How would the incoming administration's tax plan specifically help
the manufacturing and agriculture sectors?
How would you contrast that with how the House Republicans' tax
plan would affect the manufacturing and agriculture sectors
specifically?
From your perspective, how would eliminating the deductibility of
business interest expenses impact these sectors?
Answer. I entirely agree with your belief that we must improve the
prospects of domestic manufacturing if we are to have a robust and
dynamically growing economy. I look forward to working with Congress to
examine and include tax provisions that will allow us to reach our
common objective of growing the economy.
Question. We can all agree that the lockout effect is a major
problem with respect to international tax reform.
Do you support using revenue from a one-time deemed repatriation to
pay for infrastructure?
Answer. President Trump has set forth a robust tax reform proposal
which includes provisions to encourage American businesses to
repatriate earnings. President Trump is committed to the need for
infrastructure investments and we will be reviewing various
alternatives to fund this. We look forward to working with Congress to
review various alternatives to fund this.
Question. What is the source for your suggestion that there might
be as much as $3 trillion or $4 trillion in unrepatriated earnings
overseas?
Answer. In August 2016, the Joint Committee on Taxation estimated
that there were $2.6 trillion of post-1986 profits held offshore in
2015. I believe that, given growth, that number now likely exceeds $3.0
trillion.
Question. Back in November, you said that you want to get tax
reform passed in the first 90 days of Donald Trump's presidency.
Do you still think this is realistic?
Answer. If confirmed, my first priority shall be to work with
Congress to pass tax reform as quickly as possible.
Question. Do you think it is possible to meet this aggressive
timeline and still have a bipartisan process that members of Congress
will have opportunities for input into?
Answer. If confirmed, I will immediately seek input on a bipartisan
basis.
Question. Do you think the Treasury Department, including the Tax
Policy Office, will be adequately staffed in time to meet that
objective?
Answer. It will be our priority to make sure that we have the
resources to accomplish this.
Question. For years, I have called for toughening enforcement of
existing trade agreements. If we don't enhance enforcement, then we are
allowing countries to get away with abusive trade practices and we're
letting them gain an anti-competitive upper-hand.
I have worked for several years to improve monitoring and
enforcement at USTR to protect the interests of U.S. manufacturers. We
now have an Interagency Trade Enforcement Center that monitors our
trade agreements.
What specific steps would you take in your role to enhance trade
enforcement?
Answer. Enforcement of commitments under international trade
agreements is critical. We must also negotiate trade agreements that
focus specifically on benefitting American companies, American jobs,
and American economic growth. I will work closely with the Secretary of
Commerce, the Director of the White House National Trade Council, and
the U.S. Trade Representative to ensure our trade agreements put
American interests first, and that they are enforceable.
Question. How do you plan to stand up to abusive trade practices
and cheating?
Answer. I will work with the Secretary of Commerce, the Director of
the White House National Trade Council, and the U.S. Trade
Representative to examine all of our trade policies and current trade
agreements. Those agreements that do not adequately address the
interests of American companies and American jobs must be re-
negotiated. There are numerous tools, created by Congress, that can be
and must be more effectively used to address unfair trade practices and
end trade cheating.
Question. Since 2006, an enhanced income tax deduction has allowed
family farmers, ranchers, and forest landowners to get an important tax
benefit for donating a conservation easement on their land. This
enhanced incentive was made permanent on December 18, 2015.
These incentives have a long history of bipartisan congressional
and administration support. Unfortunately, the availability of these
tax benefits can attract those who seek to take advantage of the
provision for tax avoidance.
On December 23, 2016, the IRS issued Notice 2017-10 to make certain
syndicated conservation easement transactions ``listed transactions''
and require them to be disclosed to the government.
It is clear that we need to strike an appropriate balance between
making sure that conservation easements cannot be abused while still
making sure that landowners who want to engage in legitimate
transactions are not deterred from doing so.
Will you commit to work with us to protect the integrity of the
conservation easement incentive?
Will you keep this committee informed about any abuses and whether
additional enforcement tools are needed to curb these abuses?
Will you work with this committee to ensure that any abuses of the
conservation easement incentive will be appropriately addressed?
Answer. I commit that I will work with the committee to protect the
integrity of the conservation easement program and will keep the
committee informed about potential abuses and enforcement tools that
are needed.
______
Questions Submitted by Hon. Maria Cantwell
Question. During the hearing, you stated that the administration
does not support a return to Glass-Steagall, but rather supports a
``21st Century Glass-Steagall.''
I have cosponsored, along with Senators Warren and McCain, the 21st
Century Glass-Steagall Act, which builds on the original law's bright
line separation of commercial and investment banking and expands it to
include separation of derivatives trading and other shadow banking
activities. Does the administration support this legislation?
Answer. The administration believes that any new financial services
legislation should reflect the reality of today's financial
institutions and markets.
Question. If not, can you please clarify, in detail, the
administration's definition of a ``21st Century Glass-Steagall?''
Answer. I look forward to working with your office as we work on
the appropriate legislation.
Question. At your hearing, you stated that you support the Volcker
rule and ``believe the concept of proprietary trading does not belong
in banks with FDIC insurance.'' The risks to our economy posed by
proprietary trading and banks making risky bets on behalf of customers
cannot be mitigated by merely separating proprietary trading from FDIC-
insured institutions. As we saw during the financial crisis, when non-
banking affiliates of FDIC insured banks failed, they were rescued by
their insured affiliates, which in turn were forced to be rescued by
taxpayers. This was the case with State Street Bank, and your former
employer, Goldman Sachs, which converted to a bank holding company in
order to be eligible for Federal bailout funds.
Do you believe that a legal distinction between two entities, one
insured and the other not, would keep the risky activities of one from
impacting another in a crisis? Would a bright-line between these
activities not better mitigate these risks?
Answer. I am supportive of the Volcker Rule to mitigate the impact
that proprietary risk-taking may have on a bank that benefits from
Federal deposit insurance. However, as I indicated, we need to provide
a proper definition of proprietary trading, such that we do not limit
liquidity in needed markets, as indicated by the recent Fed report.
Question. In your response to me regarding the Volcker Rule, you
stated, ``I support the Volcker rule, but there needs to be proper
definition around the Volcker rule so that banks can understand exactly
what they can do and what they can't do.'' You have also called the
Volcker rule ``too complicated'' in previous comments to the media.
Would a bright line between commercial and investment banking not
be significantly less complicated and allow banks to understand exactly
what they can and cannot do?
Answer. A bright line between commercial and investment banking,
although less complicated, may inhibit the necessary lending and
capital markets activities to support a robust economy. This is why we
have suggested a 21st Century Glass-Steagall may be appropriate.
Question. Do you plan to repeal, further delay, or significantly
modify the Volcker Rule?
Answer. As Chair of FSOC, I would plan to address the issue of the
definition of the Volcker Rule to make sure that banks can provide the
necessary liquidity for customer markets and address the issues in the
Fed report.
Question. If you plan to repeal or modify the Volcker Rule, will
you commit that Congress will have the chance to review your
replacement proposal at the same time, so that we may ensure that it
credibly protects investors and taxpayers?
Answer. I would expect to review with Congress any proposed changes
to the law.
Question. What additional actions will you take as Treasury
Secretary to ensure market/financial stability? What other regulations
would help market stability? Do you believe that additional regulations
to ensure market stability and prevent financial crisis are in the
interest of ``public safety''?
Answer. I do not believe at this time that additional regulations
are needed to ensure market stability; however, I expect that we will
review this issue at FSOC on an ongoing basis.
Question. In 2014, Congress slipped a repeal of section 716 of the
Dodd-Frank Act in the ``Cromnibus'' legislation. This provision ensured
that big banks making risky derivative bets wouldn't be done out of
insured deposits. These trades increase risks for these banks and for
taxpayers, and are anti-competitive, as these banks are free to market
and trade these products knowing they are subject to a Federal
backstop. You mentioned that you ``believe the concept of proprietary
trading does not belong in banks with FDIC insurance.''
Would you support a reinstatement of this provision?
Answer. I think relooking at the nature of the regulation of
trading and proprietary risk-taking at banks is an important objective.
I look forward to studying this particular issue in detail.
Question. The Senate's Permanent Subcommittee on Investigations, as
well as the Financial Crisis Inquiry Commission, both found that one of
the more insidious causes of the financial crisis was that some Wall
Street banks, and particularly Goldman Sachs, had created securities
that were designed to fail for their investors, and then bet against
them by going short. Goldman created and sold billions of dollars in
securities that they knew were, in their own words ``crap,'' but told
their customers that these securities were the safest of the safe.
Those customers lost big while Goldman won big.
I worked with Senators Merkley and Levin to add section 621 to the
Dodd-Frank Act to prevent this from happening again. It prohibits a
bank from betting against an asset-backed security that it creates.
Despite being proposed more than 5 years ago, the rule is not yet
finalized.
If confirmed, will you commit to finalizing this rule, and if not,
how would you plan to restore trust in our markets when this sort of
self-dealing behavior is allowed?
Answer. I do understand the issue that you are trying to address by
such rule. I do believe that ``short selling'' is an integral part of
risk management. The specific reference to developing ``short
positions'' as part of structured securities offerings, particularly
when linked with a proprietary bet by the arranger of such
transactions, is certainly worth considering when developing adequate
investor protections and robust investor disclosure.
Question. Do you believe your former employer, Goldman Sachs, acted
responsibly and ethically when it bet against the same securities it
was selling to its customers?
Answer. As I mentioned in my testimony, I left Goldman Sachs nearly
15 years ago and prior to the financial crisis and the period of time
in question. I am not in a position to comment on these actions.
Question. We have had a long tradition in this country that banking
activities should be separated from physical commerce. Recently, the
Federal Reserve issued a report required under section 620 of the Dodd-
Frank Act report, recommending that Congress take action to prohibit
banks from engaging in merchant banking activities and owning certain
physical commodities.
Would you support restoration of separation between banking
activities and commerce to support competition and reduce risks?
Answer. If confirmed, I would further study section 620 to address
the issues of your concern.
Question. Many of us were disappointed when the Commodities Futures
Trading Corporation chose in December to repropose its position limits
rule, which was required under section 737 of the Dodd-Frank Act.
Do you believe that in the absence of a position limits rule, an
individual would have the potential to control or manipulate a market
and lead to excessive speculation and unwarranted price fluctuations in
important markets like energy?
Answer. If confirmed, I would further study section 737 to address
the issues of your concern.
Question. Do you believe there should be a strong position limits
rule in order to prevent market manipulation? Will you work with the
CFTC to ensure a strong rule is finalized?
Answer. It is clear that there should be no opportunity for market
manipulation in any of our equity, fixed income, commodities or
derivative markets. I would of course work with all members of the
FSOC, including the CFTC, to enforce regulatory practices that
reinforce this view.
Question. In your role on the Financial Stability Oversight
Council, will this be an issue that will be a priority for you?
Answer. See answer to question above.
Question. You stated in your response to me that ``the unemployment
rate is not real.''
Can you clarify what you meant by this statement?
Answer. The official unemployment rate (total unemployed, as a
percentage of the civilian labor force), taken alone, is not a
sufficient indicator of labor market health. A real understanding of
labor market health necessitates taking into account various Bureau of
Labor Statistics (BLS) measures of labor underutilization, including U-
5 (defined by the BLS as ``total unemployed, plus discouraged workers,
plus all other persons marginally attached to the labor force, as a
percent of the civilian labor force plus all persons marginally
attached to the labor force''). Another critical tool to determining
the real state of labor market health is BLS's labor force
participation rate.
Question. Do you believe that the United States should use a
different measure of unemployment than the U-3 rate? If so, why?
Answer. In order to inform fiscal policy decisions, the U.S. should
employ a variety of metrics to gauge the health of the economy and the
broader labor market. Currently, excessive influence appears to be
placed by U.S. policymakers on one metric--U-3 (total unemployed, as a
percentage of the civilian labor force), which ignores the massive drop
in labor force participation that occurred during the Obama
administration, and fails to include discouraged workers or persons
just marginally attached to the labor force.
Question. Isn't it true that by any measure that the Bureau of
Labor Statistics uses to track unemployment, the rate has fallen
dramatically over the last 8 years?
Answer. Both the labor market participation rate and the
unemployment rate have fallen dramatically over the last 8 years, which
suggests many Americans have given up looking for work. To be
``unemployed,'' according to BLS's definition, only includes ``people
who are jobless, actively seeking work, and available to take a job.''
If an individual ceases to actively seek work, then both the labor
force and the number of unemployed Americans decreases by one. So while
the unemployment rate has fallen, given the concurrent drop in labor
force participation to near-historic lows, the downward trend in
unemployment does not necessarily reflect improving labor market
health.
Question. During the campaign, President Trump said the
unemployment rate was a ``phony number'' and stated that the real rate
could be closer to 42 percent. Do you agree with this statement? Do you
believe that official government unemployment statistics should count
retirees, college students, and stay-at-home parents as unemployed?
Answer. If one hopes to gain a clear picture of American labor
market vitality, then using one metric--whether that be the U-3
unemployment rate or the labor force participation rate--is not
sufficient. Various unemployment metrics, including those which take
into account part-time employment for economic reasons, as well as
persons who are marginally attached to the labor force, must be used,
along with the labor market participation rate, which takes into
account those who drop out of the labor force.
Question. In 2014, the United States and our European partners put
targeted sanctions on Russian individuals and entities responsible for
violating the sovereignty and territorial integrity of Ukraine. These
sanctions came after Russia had invaded and occupied Crimea and was
supporting conflict in Eastern Ukraine. These sanctions were intended
to promote a resolution to that conflict and over the last several
years the United States and Europeans have expanded the list of Russian
individuals, companies, and banks that are sanctioned to ramp up
pressure.
Recently, Mr. Trump has said he would consider reducing sanctions
on Russia if it significantly reduces its nuclear stockpile. He said
nothing about working to end the conflict in Ukraine.
Our European allies have maintained sanctions against Russia even
when it has come at a direct impact on their businesses and economies.
If we lift them before the Ukraine conflict is resolved or for reasons
unrelated to that conflict, what message are we sending to our allies?
What message are we sending to Russia?
Answer. I agree that the United States must hold Russia accountable
for its actions, and if confirmed I will continue to support and
enforce the existing sanctions against Russia to the fullest extent.
The President has indicated he would consider sanctions relief in
return for other commitments from Russia.
Question. While we all want to work towards reducing nuclear
weapons stockpiles around the world, including in Russia, will the
Trump administration maintain sanctions related to the Ukrainian
conflict until that actual conflict is resolved? If not, why not? What
has changed that should change U.S. policy that has been strongly
supported by the U.S. Congress?
Answer. As I stated during my hearing, I intend to fully enforce
the existing sanctions imposed against Russia to the maximum extent. To
the extent OFAC conducts Russia-related sanctions enforcement
activities and investigations I will not, nor will any political
appointee in the Treasury Department under my watch, attempt to
influence, direct, or prevent any outcome to a law enforcement
investigation other than what the facts and evidence support.
Question. The Export-Import Bank, the export credit agency of the
United States, is without a quorum on the Board of Directors and
therefore unable to do deals over $10 million. In 2014, the Bank
authorized more than $20 billion in export financing and supported
almost 165,000 American jobs. However, last year, because it did not
have a quorum, it was only able to do a fraction--authorizing $5
billion in financing and supporting 52,000 jobs. The Bank has been
without a quorum despite having broad bipartisan support in both
chambers as demonstrated when it was reauthorized by a supermajority in
2015.
Given the Bank's ability to reduce risk and help American
manufacturers stay globally competitive, do you agree that the Export-
Import Bank should be fully operational? Do you agree that a working
quorum is needed as soon as possible for American job growth?
Answer. I do believe that a quorum is necessary to properly use the
Export-Import Bank. A critical focus of the administration will be to
support an America First trade agenda, including supporting small and
medium-sized business.
Question. Last year, volunteer tax preparers helped return $97
million in refunds, including $26 million in EITC benefits, to nearly
76,000 Washingtonians.
Do you support Volunteer Income Tax Assistance programs?
Answer. I will work with your office to review the issues
associated with Volunteer Income Tax Assistance grant programs.
Question. VITA volunteers have a 94% return accuracy rate. Will you
support authorization of the Volunteer Income Tax Assistance grant
program, as passed by the Finance Committee last year?
Answer. I will work with your office to review the issues
associated with Volunteer Income Tax Assistance grant programs.
Question. I understand the administration plans to pay for tax
reform, in part by eliminating ``special interest deductions.'' As we
discussed at the hearing, while I share the goal of a competitive tax
code, competitiveness for me is not just measured by what the top rate
is. It's a measurement of how much we are using the tax code to
incentivize investments in our workers and our country.
Please tell me if you consider the following provisions of tax code
special interest deductions.
The Low Income Housing Tax Credit--a provision the chairman,
ranking member, and I strongly support expanding, that has financed
nearly 3 million affordable homes for low-income working families since
its creation in the last comprehensive tax reform, that sustains nearly
100,000 jobs annually.
Answer. If confirmed, I will work with Congress to determine which
tax credits or deductions warrant retention, modification, or
elimination in order to maximize economic growth and job creation.
Question. The New Markets Tax Credit--which has leveraged nearly
$75 billion in total capital investment in low-income urban and rural
communities across the country.
Answer. If confirmed, I will work with your office to review the
New Markets Tax Credit program.
Question. The Deduction for Charitable Giving--which has since 1917
incentivized Americans to support charitable causes.
Answer. If confirmed, I will work with Congress to make sure that
tax reform preserves appropriate incentives for charitable giving.
Question. The Exclusion for Municipal Bond Interest--which lowers
borrowing rates for our local communities, allowing them to invest more
in the infrastructure that we need.
Answer. The President is committed to rebuilding America's
infrastructure. If confirmed, I will work with Congress to determine
the role of tax-exempt financing vehicles under that plan and as part
of broader tax reform.
Question. The Research and Development Tax Credit--to incentivize
the important technological innovation that creates good-paying jobs
here in America.
Answer. The Research and Development Tax Credit can be an important
tool for technological innovations and creating good paying jobs in
America, where appropriate.
Question. The Exclusion of State Sales Tax--my State is one of only
seven States that does not have an income tax. We struggled to make
this provision permanent until we succeeded in 2015. The deduction
delivers about $600 on average to each of my constituents who file
Federal income tax returns.
Answer. I know this is an important issue in many States. I will
work with you and your colleagues on this issue.
Question. Conservation Easements--which allow a deduction for the
donation of easements that preserve land. This incentive, which has led
to the protection of over 50 million acres of American land, was
increased and made permanent on a bipartisan basis in 2015. Do you
believe that golf courses should be eligible for conservation
easements?
Answer. I commit that I will work with the committee to protect the
integrity of the conservation easement program and will keep the
committee informed about potential abuses and enforcement tools that
our needed.
Question. You have stated that there will be ``no absolute tax cut
for the upper class'' through tax reform. Will you support a tax cut
for the upper class outside of tax reform, such as the potential repeal
of the Affordable Car Act's additional Medicare Hospital Insurance tax
of 0.9% on earnings over $250,000 a year and the Medicare surtax of
3.8% on unearned income above $250,000 a year?
Answer. As you are probably aware, the President has proposed
eliminating the Medicare surtax. If confirmed, I will work with
Congress to reach an appropriate resolution to this issue.
Question. Do you believe that climate change is real and that human
activity is the primary driver of it?
Answer. I believe that climate change is a complex issue, but not
one primarily driven by the Treasury Department.
Question. Do you believe that tax policy and tax reform should play
a significant role in the continuing development of clean energy
technologies to prevent climate change?
Answer. I will work with Congress to review the role of tax policy
in continuing the development of clean energy techniques.
Question. Do you support a repeal of tax incentives for oil
companies, including the section 199 deduction for oil and gas
companies, expensing of intangible drilling costs, and percentage
depletion?
Answer. If confirmed, I will work with you and members of Congress
to determine which provisions of the tax code should be retained,
eliminated, or revised.
Question. Do you believe that tar sands oil should be included in
the definition of crude oil that is subject to the Oil Spill Liability
Trust Fund tax?
Answer. If confirmed, I will work with Congress and the President
on how these definitions should be properly applied.
Question. Do you support Notice 2013-60 issued by the IRS on
September 20, 2016 to clarify the commence construction/continuous
construction safe harbor for the production and investment tax credits?
Answer. If confirmed, I will work with Congress to determine which
provisions of the current tax code should be retained, revised, or
eliminated.
Question. Do you support efforts to improve the ability of
developers to monetize the section 45 and section 48 production and
investment tax credits? Do you think the need for improved monetization
will increase as these credits phase down?
Answer. If confirmed, I will work with Congress to determine which
provisions of the current tax code should be retained, revised or
eliminated.
Question. During the first 11 months of 2016, U.S. biodiesel
imports totaled 597.74 million gallons, up 93% from the same period in
2015. Do you support bipartisan legislation introduced by Senator
Grassley and me to convert the Biodiesel Tax Credit from a blender's
tax credit to a production tax credit to stop the subsidy of foreign
biodiesel and create jobs in America?
Answer. If confirmed, I will work with Congress to determine which
provisions of the current tax code should be retained, revised, or
eliminated.
Question. Do you support the extension of expired clean energy tax
breaks, including incentives for fuels, energy efficient new home and
commercial building construction, and building retrofits?
Answer. If confirmed, I look forward to working with Congress on
the role of energy credits.
Question. Do you believe all technologies, including hydropower,
should receive the same tax credit rate under the production tax
credit?
Answer. If confirmed, I look forward to working with Congress and
the President to determine which technologies should be eligible for
the production credit and what the appropriate levels for those credits
should be.
Question. In 2012, the people of Washington State chose, by popular
vote, for our State to implement an adult-use marijuana system. Seven
more States passed similar laws on their ballots this past November.
Will you commit to maintaining the 2014 Financial Crimes
Enforcement Network (FinCEN) guidance to financial institutions that
allows them to work with regulated marijuana-related businesses, while
increasing transparency and improving public safety?
Answer. If confirmed, I will work with your office to review the
2014 FinCEN guidance.
Question. Do you support further changes to the tax code and
banking law to ensure that these business can operate on a level
playing field with other industries?
Answer. This is a very important issue. If confirmed, I will work
with Congress and the President to determine which provisions of the
current tax code should be retained, revised, or eliminated to ensure
that all individuals and businesses compete on a level playing field.
Question. Washington State is one of seven States without an income
tax. Because of decisions by the courts, we are prohibited from
requiring out-of-state retailers to collect and remit sales tax on
purchases shipped to Washington State. This gap in our tax collection
is estimated to cost our State government hundreds of millions of
dollars in revenues per year and disadvantages brick and mortar small
businesses in Washington State, who must compete with out-of-state,
online retailers that do not collect sales tax.
Do you support legislation to require out of State retailers to
collect and remit sales tax to customers in other States?
Answer. This is a very important and complicated issue. If
confirmed, I will work with Congress and the President to ensure
legislation considered by Congress is consistent with the President's
tax policy objectives.
Question. Should the tax remitted be destination-based or origin-
based?
Answer. If confirmed, I will work with Congress and the President
to determine the best approach to this issue.
Question. Mr. Mnuchin, you have stated that the offshore hedge
funds you failed to initially report were set up not for tax avoidance
but to let pensions and non-profits invest.
Please provide the ratio of the amount of investment in these
offshore funds, at their peak, that were made by pension fund and non-
profits versus other investors.
Answer. Since many of the investors in our offshore fund consisted
of fund of funds, I do not have the exact characterization of the
underlying investors. However, I do know that approximately 20% of the
fund consisted of individuals, family companies, or trusts that were
true foreign entities.
Question. Did any of your marketing materials for your Anguilla or
Cayman Island funds express or advertise the tax benefits of their
offshore location?
Answer. The offering document for Dune Capital International
contained normal tax consideration disclosures as well as ERISA and
other regulatory considerations.
Question. Please provide to the Finance Committee any and all
marketing materials and letters.
Answer. As indicated in the preceding response, the confidential
offering memorandum describes the tax consequences of the investment
but does not express or advertise ``tax benefits'' from the investment.
The description of tax consequences in the confidential offering
documents is typical for such investments, including a description of
U.S. and Anguilla tax rules.
______
Questions Submitted by Hon. Bill Nelson
Question. As you know, the Treasury Secretary heads the Financial
Stability Oversight Council (FSOC), which is responsible for rooting
out systemic risk in our financial system. If confirmed, what would be
your top three priorities for FSOC?
Answer. The Dodd-Frank Act requires the FSOC to conduct activities
to execute three responsibilities: to identify risks to the financial
stability of the United States; to promote market discipline; and to
respond to emerging threats to the stability of the United States
financial system. If nominated, I will work to fulfill these three
statutory responsibilities.
Question. Do you believe large nonbank financial companies, like
AIG, should be left alone or do you believe they should be subject to
closer scrutiny if they pose a significant risk to the financial
system?
Answer. If confirmed, I look forward to working with FSOC and
understanding the work that they have done on this issue before
reaching a judgment.
Question. Do you think Goldman Sachs did anything wrong in the lead
up to the 2008 financial crisis? If so, please explain.
Answer. Senator, as I left Goldman Sachs in 2002, I am not in a
position to offer judgment on their activities after that time.
Question. The Treasury Department is responsible for combating
terrorism financing. This has taken on increasing importance over the
years as terrorist groups like ISIS increasingly rely on access to
global financial networks to carry out their acts of terror. What do
you believe you could contribute to this critical area of our national
security?
Answer. If confirmed as Treasury Secretary, I will use the many
tools the Treasury Department has to combat terrorist financing to the
maximum amount allowable by law.
Question. Some members of Congress, including myself, have proposed
giving the Treasury Secretary the ability to establish minimum
competency standards for tax preparers--to ensure they are actually fit
to do your taxes and not criminals. The lack of quality control in the
tax preparer industry has been known to contribute to the proliferation
of identity theft-related tax fraud and tax scams. Do you think it
makes sense to make sure paid tax preparers are qualified to do your
taxes? If so, what do you plan to do to make this issue a priority? If
not, why?
Answer. I agree that tax preparers should be qualified. I am
committed to reviewing any proposals addressing this area.
Question. The National Taxpayer Advocate recently reported that
Hispanic Americans are most at risk to abuse by disreputable tax
preparers, stating: ``Given language barriers and less education,
Hispanics may be especially vulnerable to unscrupulous return preparers
who promote high interest loans and charge high fees.'' What can you
say to Hispanic Americans to give them some comfort about the next 4
years in relation to this issue? How would you reach out to this
community and ensure they are not forgotten?
Answer. If confirmed, I look forward to working with Congress, the
National Taxpayer Advocate, and the Internal Revenue Service to
identify ways to make sure all Americans have the ability to comply
with our tax laws. In addition, the IRS website is available in
Spanish, and we will continue to make information available to help
educate the Hispanic community.
Question. What can you tell us about your commitment to making sure
tax reform is fully paid for and not reliant on budget gimmicks, such
as timing shifts or one-time revenue for permanent changes?
Answer. We are committed enacting tax reform that grows the
economy, jobs, and incomes for hardworking Americans. We believe that
the higher growth resulting from tax reform, reduced regulation, and
eliminating the trade deficit will generate significant additional
revenue.
Question. Do you believe a tax reform plan that provides the lion's
share of its tax cuts to the top 1 percent of income earners and large
corporations is better for the economy than a plan that makes the tax
code more progressive and provides the majority of its benefits to the
middle class and working poor?
Answer. Maximizing economic growth, allowing working people to keep
more of their money, and creating jobs and greater opportunity for all
Americans is our objective. We are committed to working with Congress
to maintain an appropriate level of progressivity in the tax code.
Question. Are you familiar with the details of what House leaders
are planning for tax reform? If so, do you have any concerns about any
provisions within the plan?
Answer. I am very familiar with the Blueprint, titled ``A Better
Way for Tax Reform.'' I will work closely with the leadership in the
House and Senate on needed tax reform.
Question. Separate from the Joint Comprehensive Plan of Action,
which relates to Iran's nuclear program, we have long imposed sanctions
on Iran unrelated to its nuclear program. They were put in place in
response to Iran's weapons trafficking, support for terrorism, money
laundering, and ballistic missile testing. Until those activities
cease, those sanctions should remain in effect. What commitment can you
make to ensure Iran is not gaining access to the U.S. financial system
without making drastic changes to its behavior?
Answer. I will act to fully enforce all existing sanctions against
Iran--including with respect to its sponsorship of terrorism and other
illicit activities. I am fully committed to bringing every available
Treasury tool and authority to bear to prevent Iran from accessing the
U.S. financial system.
Question. If confirmed, you will be in charge of overseeing foreign
assets blocked by the Treasury Department, including the assets of the
Revolutionary Armed Forces of Colombia, better known as FARC, a
terrorist organization and drug syndicate. Last year, I introduced a
bill with Senator Rubio to help the Americans that were murdered and
held hostage by the FARC, and their families, gain access to more
assets blocked by the Treasury Department, as restitution for their
harrowing ordeal. Can you commit to ensuring FARC victims and their
families gain access to assets blocked under the Kingpin Act and work
with me to help get my legislation enacted into law?
Answer. I am committed to utilizing all of Treasury's assets to
confront terrorism and narco-trafficking networks. If confirmed, I
would look forward to working with you on this issue and welcome any
suggestions toward that goal.
Question. How do you think we should address the problem of
currency manipulation--when other countries intervene in their currency
markets to control the value of their currency and gain a trade
advantage? Do you think it is something we can solve unilaterally, or
do we need to work within the G20 to find a global solution?
Answer. Existing U.S. laws provide the procedures whereby the U.S.
Treasury is to evaluate the currency policies of foreign nations. If I
am confirmed, I will follow the procedures and recommend changes to
those procedures if needed.
Question. If confirmed, what would you like to accomplish by the
end of your term?
Answer. As Treasury Secretary, my primary objective will be to
increase U.S. economic growth through significant tax, regulatory, and
trade reform. I believe, together with the President, that America has
unlimited potential; through sound policies aimed at achieving solid
finances and a dependable dollar, we can establish a firm foundation
for productive growth and new levels of prosperity.
Question. Are you familiar with the trademark dispute related to
the Cuban Government's theft of the Havana Club Rum trademark? If so,
what are your thoughts on reviewing the decision that allowed the
Cuban-based beneficiaries of the theft to pay the fee that allows them
to renew the trademark in the United States? If not, can you commit to
looking into this dispute and meeting with U.S. stakeholders to fully
understand the issue?
Answer. Although I am not familiar with this it, it is long-
standing U.S. law and policy to prevent the registration or renewal of
trademarks obtained through confiscations, without compensation to the
original owners. Thus, if confirmed, I would look forward to working
with your office to learn more about this dispute and meeting with the
U.S. stakeholders.
Question. What are your thoughts about politicizing decisions made
by the Federal Reserve Board of Governors and the benefits of an
independent central bank?
Answer. As you know, the Federal Reserve is organized with
sufficient independence to conduct monetary policy and open market
operations. I endorse the increased transparency we have seen from the
Federal Reserve Board over recent years.
Question. As you know, if you are confirmed as Treasury Secretary,
you would serve as the chair of the Committee on Foreign Investment in
the United States (CFIUS). CFIUS has the important responsibility of
reviewing foreign investment transactions to ensure they do not
threaten our national security. What do you believe are the most
pressing challenges facing CFIUS today? What would be your approach to
dealing with those challenges, and how would you approach any conflicts
of interest that come before CFIUS?
Answer. If confirmed, I would ensure that CFIUS is fully able, to
the maximum amount allowable by law, perform its important
responsibilities in assessing whether foreign investment transactions
pose a threat to U.S. national security.
Question. In 2015, Congress made the conservation easement tax
deduction permanent, reinforcing our commitment to conservation. What
are your thoughts on conservation easements? Do you believe tax reform
should preserve the incentive for conservation easements?
Answer. I commit that I will work with the committee to protect the
integrity of the conservation easement program and will keep the
committee informed about potential abuses and enforcement tools that
our needed.
______
Questions Submitted by Hon. Robert Menendez
Question. Shortly after then President-elect Trump announced your
nomination, you told CNBC that you would focus on rolling back parts of
the Dodd-Frank Wall Street Reform Act. Specifically, you said, ``the
number one problem with Dodd-Frank is that it's way too complicated and
cuts back lending.''
What specific provisions would you advise the President and
Republicans in Congress to change, repeal, or unwind?
Answer. I would advise the President and members of Congress on
rules that undermine economic growth and job creation. A particular
focus should be placed on reducing the regulatory costs faced by
community financial institutions, and making sure that small and
medium-sized business have access to credit.
Question. During your confirmation hearing, you appeared to be
supportive of the Volcker Rule for FDIC-insured institutions, though
you also mentioned complications with the implementation of the rule.
While the Department of the Treasury was not responsible for writing
the rule, it was responsible for coordinating the rulemaking.
What is your view on Treasury's role in making any changes to the
Volcker Rule?
Answer. I am supportive of the Volcker Rule to mitigate the impact
that proprietary risk taking may have on a bank that benefits from
Federal deposit insurance. However, as I indicated we need to provide a
proper definition of proprietary trading, such that we do not limit
liquidity in needed markets, as indicated by the recent Fed report.
Question. How do you plan to engage with the other financial
regulators on this issue, and what specific changes would you like to
see made?
Answer. I would encourage the regulators to define the Volcker rule
in a way that does not hinder liquidity and customer trading as
outlined in the Fed report.
Question. During your confirmation hearing, you said, ``regulation
is killing community banks.'' According to data released by the FDIC on
November 29, 2016, community banks reported net income rose $593
million, or 11.8 percent from the 2015 period. The FDIC also reported
that community banks' net operating revenue totaled $23 billion, an
increase of 8.5 percent from a year earlier. Chair Gruenberg said,
``community banks, which account for 43% of the industry's small loans
to businesses, continued to grow their small business loans at a faster
pace than the rest of the industry.''
What specific regulations do you believe are particularly
detrimental to the community banking industry, and what changes would
you recommend?
Answer. I look forward to working with banking regulators and
Congress to determine what particular regulations could be reformed to
better serve customers and create a flow of credit while preserving key
capital adequacy and safety and soundness standards.
Question. Mr. Mnuchin, you have extensive experience as a board
member of a large regional bank. As you know, there have been a number
of proposals in Congress to change the Dodd-Frank created enhanced
prudential regulatory regime administered by the Federal Reserve for
banks with more than $50 billion in assets.
What is your view on the role of regulation in overseeing large
regional banks?
Answer. I endorse rethinking regulatory requirements facing large
regional banks in order to regulate the banking sector in a more
effective manner. In particular, we should examine whether it is
appropriate for financial institutions that engage almost exclusively
in traditional banking activities with consumers and businesses to be
subject to measures intended for our largest and most complex financial
institutions.
Question. As Treasury Secretary, you will chair the Financial
Stability Oversight Council (FSOC), and you will have the
responsibility of overseeing efforts to address systemic risks to the
system.
Will you continue FSOC's efforts to identify and address the risk
that so-called shadow banks and other non-banks may pose to the
economy?
Answer. If confirmed, I will review the work that has been done on
the so-called shadow banks and other non-banks that pose risk to the
economy.
Question. As you know, the FSOC can set aside a CFPB final
regulation with the vote of two-thirds of its members if the regulation
would put the safety and soundness of the U.S. banking system or U.S.
financial stability at risk, a process that begins with the petition of
a single member of the Council.
What is your view on the FSOC's role in overseeing the work of the
CFPB?
Answer. If confirmed, I will review the work and governance of FSOC
and will look forward to following up with your office.
Question. Some in Congress have pushed for changes that would make
it even easier for FSOC to overturn CFPB rules. Do you support those
proposals? If so, why?
Answer. If confirmed, I will review the work and governance of FSOC
and will look forward to following up with your office.
Question. As you know, the Office of Financial Research (OFR) was
created to, unlike any other existing agency, look across the entire
financial system to fill critical data and information gaps that
policymakers and the public sorely needed following the Great
Recession. Congress realized the need for an independent team of
experts at the Treasury Department that would have the capacity to
perform high-level data-collection and analysis on potential risks to
U.S. financial stability. The OFR can also help reduce regulatory
burdens and reporting requirements for financial institutions by
ensuring data standardization. As someone who has served in many
different roles in the financial services industry, you have witnessed
firsthand the need for the OFR.
Will you support the OFR and its research and data collection
activities to ensure we identify and can appropriately address future
potential threats and minimize duplicative data reporting as soon as
practicable?
Answer. More needs to be done to minimize duplicative data
reporting. I support efforts to revisit the Dodd-Frank framework in
order to ensure policymakers have the right information to address
future potential threats to the U.S. financial system.
Question. In November 2016, the California Reinvestment Coalition
and the Fair Housing Advocates of Northern California filed a complaint
with the U.S. Department of Housing and Urban Development asking the
Department to investigate allegations that CIT Bank, as a successor to
OneWest, violated the Fair Housing Act. Specifically, the complaint
alleges that the bank failed to locate branches in communities of
color, extended few or no mortgage loans to borrowers of color, and
maintained and marketed real estate owned homes in predominantly white
neighborhoods better than in neighborhoods of color.
What are your views on the importance of fair lending and fair
housing laws?
Answer. In my opinion, lending and housing discrimination have no
place in a well-functioning economy, and I have always been committed
to compliance with fair lending laws. During my tenure, OneWest Bank
completed fair lending examinations (including examinations of our
servicing and loss mitigation activities) conducted by both the Office
of the Comptroller of the Currency (``OCC'') and the Consumer Financial
Protection Bureau. In addition, an OCC examination of the Community
Reinvestment Act compliance of OneWest Bank under my leadership found
that our ``geographic distribution of loans [was] excellent,'' our
performance under the OCC's Lending Test was ``high satisfactory,''
both home mortgage refinance and home purchase lending were
``excellent,'' and our multifamily lending activities were ``good.''
Overall, ``the OCC did not identify any evidence of discriminatory or
other illegal credit practices with respect to'' OneWest Bank. And
while two community groups have made unfounded allegations about
OneWest, I am proud to have received the support of the former
executive director of HOPE NOW, the President and CEO of the National
Asian American Coalition, and multiple former State and Federal bank
regulators.
Question. The Obama administration has issued a series of
regulations and licenses that allow American businesses to engage in
business transactions with entities that are owned by the Cuban
military, which in practice is nearly impossible to separate from the
Castro regime. Although the administration has touted these investments
as supporting the Cuban people, the truth is the regime and the
military have a tight grip on just about every industry. In fact, in
December, the president of a major travel company lamenting the lack of
infrastructure in Cuba told NBC full stop that: ``Tours and experiences
are controlled by the government tour company.''
Additionally, the Treasury's Office of Foreign Asset Control has
granted licenses for businesses and companies to transact with
properties and assets that the Cuban government has confiscated from
its own citizens and even from American citizens. Both of these
transactions are inconsistent with U.S. statutes and in fact blatantly
contradict the intention of the LIBERTAD Act--and I know because I
wrote that law.
Will you commit to reversing decisions that allow American
businesses to engage in transactions with Cuban-military owned entities
or properties that were stolen from American citizens?
Answer. If confirmed, I commit to fully and effectively enforcing
all sanctions prescribed by the LIBERTAD Act and other Cuba sanctions
legislation. Moreover, I would look forward to working with you and
your office to review and ensure that all prior licenses and current
regulations are consistent with statutory intent.
Question. On October 12, 2016, Donald Trump said, ``The people of
Cuba have struggled too long. I will reverse Obama's executive orders
and concessions towards Cuba until freedoms are restored.''
Do you stand by that statement? As many of the Executive orders and
regulations that impact our relationship with Cuba have gone through
the Treasury Department, will you commit to reversing those
``concessions'' and regulations?
Answer. If confirmed, I will enforce all statutorily-mandated Cuba
sanctions to the fullest extent of the law. I will also implement any
revisions to the current regulations pursuant to President Trump's
policy.
Question. Mr. Mnuchin, I'm disappointed that you wouldn't support
new sanctions on Russia for, among other things, interfering in our
election. Moreover, Mr. Trump said that he would potentially lift
sanctions against Russia quickly, unilaterally, and without input from
Congress. For those of us who have both authored much of the laws
putting the architecture for comprehensive and effective sanctions in
place, and those of us who believe that the legislative branch must be
an effective check on the Executive, this is alarming. Sanctions that
carry the full weight of law are a critical component of our national
security strategy.
Would you support efforts of the President to ignore the will of
Congress and unilaterally lift sanctions currently in place on Russian
individuals and actors?
Answer. If confirmed, I will continue to support and enforce the
existing sanctions against Russia to the fullest extent, as I stated
during my confirmation hearing. To the extent that the President and
his national security advisors determine that it is in the best
interest of the United States to modify the sanctions or impose others,
I will fully enforce those sanctions in support of the President's
national security strategy.
Question. Due to President Maduro's failed policies and lack of
respect for the rule of law, Venezuela is currently facing a dire
humanitarian and economic crisis. Its state-owned oil company PdVSA
(Pedevesa) and its subsidiary Citgo, are under extreme financial
pressure and may not be able to pay their bills in the near future.
Under a recent deal, 49.9% of Citgo was mortgaged to Rosneft, the
Russian government-owned oil company run by Vladimir Putin crony Igor
Sechin. It is also possible that Rosneft acquired other PdVSA bonds on
the open market what could bring their ownership potential to over 50%.
If Citgo defaults on its debts, Rosneft, an entity currently under
American sanctions because of Russia's belligerent behavior, could come
to own a majority stake in strategic U.S. energy infrastructure
including 3 refineries and several pipelines.
Given the close ties between Rosneft and Putin, Putin's interest in
undermining the United States, and Putin's willingness to use energy as
a weapon, does this potential deal concern you?
Answer. Rosneft is currently subject to ``sectoral sanctions''
under Directives 1 and 2, which were issued pursuant to Executive Order
13662 of March 20, 2014. Given that the Treasury Department is
responsible for the implementation and enforcement of economic
sanctions imposed by the United States, if confirmed as Treasury
Secretary, I will ensure that any transaction by Rosneft that
potentially impacts U.S. strategic energy interests is carefully
monitored and will advise the President accordingly.
Question. Do you think that is in our national interest?
Answer. Rosneft is currently subject to ``sectoral sanctions''
under Directives 1 and 2, which were issued pursuant to Executive Order
13662 of March 20, 2014. Given that the Treasury Department is
responsible for the implementation and enforcement of economic
sanctions imposed by the United States, if confirmed as Treasury
Secretary, I will ensure that any transaction by Rosneft that
potentially impacts U.S. strategic energy interests is carefully
monitored and will advise the President accordingly.
Question. Should a sanctioned Russian company have control over
critical U.S. energy infrastructure?
Answer. Rosneft is currently subject to ``sectoral sanctions''
under Directives 1 and 2, which were issued pursuant to Executive Order
13662 of March 20, 2014. Given that the Treasury Department is
responsible for the implementation and enforcement of economic
sanctions imposed by the United States, if confirmed as Treasury
Secretary, I will ensure that any transaction by Rosneft that
potentially impacts U.S. strategic energy interests is carefully
monitored and will advise the President accordingly.
Question. Will you initiate a CFIUS review?
Answer. If confirmed, after reviewing the work of CFIUS, I would
determine whether I believe a CFIUS review is needed. I am happy to
review this issue with your office.
Question. Does ExxonMobil's involvement in deals with Rosneft
present any concern for you given our potential new Secretary of State?
Answer. I believe the President's decision to nominate Rex
Tillerson is an excellent choice for Secretary of State and have every
confidence that he will hold paramount the interests of the United
States and the American people.
Question. Iran remains designated by the Department of State as the
leading state sponsor of terrorism, and it continues to aid terrorist
groups like Hezbollah and Hamas that directly threaten the United
States, our interests, and our allies. Congress and the executive
branch have imposed a comprehensive and restrictive network of
sanctions designed to stop the flow of cash to and from known
individuals and entities involved in Iran's sponsorship of terrorist
networks, weapons trafficking, and nuclear proliferation and human
rights abusers.
How will you ensure that these sanctions are enforced?
Answer. As Treasury Secretary, I will act to vigilantly enforce all
existing sanctions against Iran--including with respect to its
sponsorship of terrorism, nuclear proliferation, abuse of human rights,
and other illicit activities. I will ensure that the Office of
Terrorism and Financial Intelligence is making every effort to enforce
existing sanctions and coordinating with the U.S. Department of Justice
and other U.S. law enforcement agencies and the Intelligence Community
to execute a ``whole of government'' approach to enforcement of
existing sanctions against Iran.
Question. What steps will you take to strengthen these sanctions
and ensure that American companies comply with laws put in place to
stop money from going to sponsors of terrorism?
Answer. I will ensure that the Office of Terrorism and Financial
Intelligence is making every effort to enforce existing sanctions and
coordinating with the U.S. Department of Justice and other U.S. law
enforcement agencies and the Intelligence Community to execute a
``whole of government'' approach to enforcement of existing sanctions
against Iran. I will also work with the President to ensure that
Treasury is engaged in meaningful consultation with the Congress to the
extent existing sanctions require modification or strengthening to
combat sponsors of terrorism.
Question. As the Departments of State and Treasury continue to make
determinations about known sponsors of terrorism or human rights
violators, will you impose further sanctions on individuals and
entities?
The Iran's Islamic Revolutionary Guard Corps (IRGC) plays an
outsized role in virtually every sector of the Iranian economy.
Numerous sanctions remain in place on the IRGC and affiliated entities
related to proliferation concerns, human rights violations, and
ballistic missile development. Last October, the Treasury Department
issued guidance stating that it is ``not necessarily sanctionable'' for
foreign persons to engage in transactions with an entity that is
``controlled in whole or in part'' by the IRGC. Do you support this
position? Or would you look to revises the guidance?
Last year, Treasury finalized a rule requiring banks to identify
the beneficial ownership of companies they do business with. As part of
the rule, an entity that has a 25% stake in the company must be
identified. When it comes to the IRGC, the standard to determine
ownership or control of a company is still 51%. Do you agree with this
threshold?
Answer. If confirmed, I intend to vigilantly enforce existing
sanctions, including continuing to make determinations and imposing
sanctions on individuals and entities as appropriate under Treasury's
authorities.
Question. Secondary sanctions proved to be one of the most
effective mechanisms we have to fully isolate countries like Iran from
gaining access not only to American financial markets capitol, but also
to European markets and companies.
How will you work with our allies to ensure that they comply with
existing networks even as they seek to do business with Iran?
Answer. If confirmed, I intend to coordinate with the Secretary of
State on the administration's efforts to engage with the international
community regarding the need to vigilantly enforce the Joint
Comprehensive Plan of Action, and to remind other nations that waived
secondary sanctions remain available for re-imposition by the United
States in the event that Iran fails to comply with its commitments. The
Congress's December 2016 reauthorization of the Iran Sanctions Act with
overwhelming bipartisan majorities emphasized to the international
community that powerful secondary sanctions remain a viable and
available tool for the foreseeable future with respect to Iran's
compliance with the JCPOA. I will also coordinate with finance
ministers around the globe and continuously remind them of their
respective nations' obligations to assist the United States in
effectively enforcing the JCPOA.
Question. In November 2011, the U.S. Government designated Iran and
its entire financial sector--including its central bank--a
``jurisdiction of primary money laundering concern.''
Has anything fundamentally changed in how Iran behaves regarding
money laundering?
Answer. If confirmed, I will carefully consider all available
information and make an assessment as to whether anything has
fundamentally changed with respect to the 2011 designation of Iran as a
jurisdiction of primary laundering concern.
Question. Has Iran addressed the concerns we laid out in 2011?
Answer. If confirmed, I will carefully consider all information and
make an assessment regarding whether Iran has fully and effectively
addressed the concerns set forth by the United States in 2011.
Question. What actions would Iran have to take in order to
alleviate the concern that its financial institutions were engaging in
illicit activity?
Answer. If confirmed, I will make a careful and deliberate
assessment of the actions required for Iran to alleviate concerns about
illicit activity by its financial institutions and advise the President
and National Security Council accordingly.
Question. How would you classify the level of financial crimes and
sanctions risk of doing business in and with Iran?
Answer. I am not in a position at this time to provide a
classification of financial crimes and sanctions risk of doing business
with Iran, but commit that if I am confirmed as Treasury Secretary, I
will assess all information available to me to make such an assessment
and advise the President and the National Security Council in that
regard.
Question. Given the designation as a ``primary money laundering
concern'' we're talking about the need for Enhanced Due Diligence for
any and all financial activities, at a minimum, correct?
Answer. Given the designation of Iran as a primary money laundering
concern, it is prudent for any individuals or entities engaging in
authorized dealings with Iran to ensure they have adequately assessed
the risks of such activity and take all appropriate steps to mitigate
those risks accordingly.
Question. How do we plan to ensure that Iran doesn't game the FATF
system and simply go through the motions of compliance with no real
impact on the risks of their financial system and effectiveness of
their AML/CFT regime?
Answer. I am not in a position at this time to describe the
administration's plans to ensure that Iran is not gaming the system or
is instead undertaking steps to provide transparency in its financial
system, but commit that if confirmed as Treasury Secretary to dedicate
all of Treasury's tools and resources to the administration's efforts
in that regard. Transparency in the Iranian financial system is
critical to verifying an effective anti-money laundering and counter
terror finance regime.
Question. Can a state sponsor of terror ever be a trusted financial
player in the international financial system?
Answer. If confirmed, I will coordinate with the President and the
National Security Council to vigilantly enforce all existing sanctions
against Iran--including with respect to its sponsorship of terrorism,
until such time as the United States determines that Iran is no longer
a state sponsor of terror.
Question. Glencore, a Swiss-based commodity trading and mining
company and Qatar's sovereign wealth fund, in December bought 19.5
percent of Russian state-owned and American-sanctioned company Rosneft.
We are still learning details of the transaction, but it appears there
was a bond sale by Rosneft to raise money which was then reinvested as
loans issued by Russian banks to the foreign investors. Depending on
how the deal was structured, this could have created a tremendous
financial windfall for the Putin regime.
Given that our Treasury Department is currently investigating the
sale, would you commit to continuing this investigation?
Answer. I am not in a position to comment on the details of an
ongoing investigation by the Treasury Department. However, if confirmed
as Treasury Secretary, to the extent the Treasury Department is in the
course of an investigation related to economic sanctions I will not,
nor will any political appointee in the Treasury Department under my
watch, attempt to influence, direct, or prevent any outcome to a law
enforcement investigation other than what the facts and evidence
support.
Question. If the transaction is ultimately found not to have
violated U.S. sanctions, would you agree with me that we need to
tighten the statute to ensure that Russia is unable to access foreign
financing unless it reverses the belligerent actions which spurred the
sanctions in the first place?
Answer. I am not in a position to comment on the details of an
ongoing investigation by the Treasury Department and whether or not a
particular transaction may be found to violate U.S. sanctions. As
Treasury Secretary, I will work with the President to implement and
enforce sanctions as necessary to promote the President's national
security objectives.
Question. Treasury's Under Secretary for Terrorism and Financial
Intelligence David Cohen indicated in 2014 that Qatar and Kuwait were
permissive jurisdictions for terror finance and that Qatar was granting
legal impunity to U.S.-designated al-Qaeda financiers. Since then,
there is no visible indication that either government has convicted
even a single individual, in person or in absentia, who is under
counterterrorism sanctions by the United States or the UN.
What would you do as Treasury Secretary to motivate U.S. allies
that refuse to take effective legal action against a broad swathe of
terrorist financiers who have operated inside their territory?
Answer. The President has indicated his intent to undertake every
effort to defeat ISIS, and as Treasury Secretary, I will ensure the
Department is focused on detecting, exposing, and eliminating terror
groups' funding networks--including by engaging and collaborating
through the Office of Terrorism and Financial Intelligence with other
nations' financial intelligence units to expose and eliminate these
networks. I will coordinate with finance ministers around the globe to
work with the United States on dedicating their respective nations'
resources to isolating these terror financiers and bringing them to
justice. We will also coordinate with the U.S. Department of Justice,
the IC, and other parts of the United States national security
apparatus to execute a ``whole of government'' approach to paralyzing
terror groups' financing activities.
Question. There is an ongoing debate on how reliable an ally China
is in countering North Korean weapons proliferation. Do you believe
that we should work through Beijing to stop North Korea's nuclear
weapons and ballistic missile programs or should we look to sanction
persons and banks in China aiding these programs?
Answer. A ``whole of government'' approach by the United States
will be most effective in countering North Korea's nuclear weapons and
ballistic missile programs. Among other things, this approach must
include vigilant enforcement of all existing sanctions imposed by
Executive order and /or legislation involving North Korea; examination
and development by the Office of Terrorism and Financial Intelligence
of additional potential sanctions targets; diplomatic engagement with
China to assist the United States in deterring and impeding these North
Korean activities; and consultation and collaboration with the Congress
regarding other steps that might be taken in this regard.
Question. While responding to questions regarding then President-
elect Trump's Tax Plan that you helped craft, you stated that: ``. . .
there will be no absolute tax cut for the upper class. . . .'' Despite
this pledge, estimates by both the Tax Foundation and Tax Policy Center
indicate that the top \1/10\ of 1 percent of the Nation would receive a
huge windfall.
Do you plan to revise the President's tax plan so it is consistent
with this pledge?
Answer. In working with Congress, we will make sure that the
primary focus of the tax plan is a middle-income tax cut, tax
simplification, and more competitive tax rates for U.S. business so
they can compete effectively.
Question. You have advocated changing the way the cost of tax
legislation is calculated or ``scored'' for the purposes of analyzing
its impact on the budget. But as you know, different so-called
``dynamic scoring'' models produce a wide range of results depending on
what assumptions are made. The Joint Committee on Taxation (JCT) is a
non-partisan, highly respected institution that provides members of
Congress and the general public with objective analysis regarding the
``cost'' of tax legislation.
Do you commit to respecting their independence and pledge to
refrain from exerting any pressure on JCT and their chosen model of
scoring?
Answer. The Joint Committee on Taxation has been an important
participant in and contributor to the tax reform process. I will work
with all congressional committees, including JCT and the Committee on
Ways and Means, the Committee on Finance, and the leadership of the
House and Senate, to develop tax legislation.
Question. Do you commit to accepting JCT's model as the final say
for scoring purposes?
Answer. I will work with all congressional committees, including
JCT and the Committee on Ways and Means, the Committee on Finance, and
the leadership of the House and Senate, to develop tax legislation.
Question. In terms of distributional impact of a tax plan, one
large variable is who bears the burden of the corporate tax: the worker
or the shareholder.
Do you believe workers or shareholders effectively pay a larger
portion of the U.S. corporate tax?
Answer. The shareholder pays the tax; however, the burden of high
taxes also impacts workers, jobs, and wages.
Question. Sometime next year, Congress will face a decision whether
or not to increase the Nation's debt limit in order for Treasury
Department to continue paying our Nation's bills. Back in 2011 when
congressional Republicans held the debt limit hostage, we saw a
downgrade in the U.S. credit rating, and consumer confidence plummeted.
When I questioned Federal Reserve Chair Janet Yellen last year about
the consequences of what would happen if we didn't pay our debts in
full, she responded clearly and forcefully warned us of the dire
consequences. I quote:
``U.S. Treasury securities are the safest and most liquid
benchmark security in the global financial system. They play a
critical role in our financial markets, and the consequences of
such a default, while they're uncertain, I think there can be
no doubt that it would be in the long run harmful to U.S.
interests. At a minimum, it would result in much higher
borrowing costs.''
Question. Is it possible for the U.S. to renegotiate its sovereign
debt without defaulting?
Will you go to Congress and advocate to have the Debt Limit
increased so we can pay our debts?
Answer. As I stated during my confirmation hearing, I believe the
debt limit should be raised. I believe the United States should honor
its debts.
Question. President Trump has previously boasted that his
Presidency would result in 4- to 5-percent GDP growth per year and
create 25 million jobs in the next decade.
What is your prediction for annual GDP growth and job creation over
the next 4 years?
Do you believe President Trump will create as many jobs as
President Obama did on an annual basis?
Answer. It is my belief that our economy will grow significantly in
this administration, and will benefit American families and workers
that have been displaced and left behind under previous policies.
______
Questions Submitted by Hon. Thomas R. Carper
Question. President Trump has proposed several tax reform plans,
all of which would drastically cut taxes on wealthy individuals.
Studies of President Trump's revised tax reform plan found that the
largest benefits, both in dollar amounts and in percentage terms, would
accrue to the highest-income households. According to an analysis by
the Tax Policy Center, the Trump tax reform plan by itself would also
raise taxes on middle class families with children, in large part
because it would repeal the personal exemption for children and force
single parents with children to file as singles and so forfeit the more
generous standard deduction they currently receive. The Trump proposal
does this while simultaneously delivering massive tax cuts to the
highest-income taxpayers and businesses. TPC's analysis also notes that
the incoming President's proposed child care deduction and tax credit
fails to compensate families for these other lost tax benefits.
At the same time, Mr. Mnuchin, you have stated that, ``Any
reductions we have in upper-income taxes will be offset by less
deductions so that there will be no absolute tax cut for the upper
class.'' Can you explain precisely what you mean--regarding both the
definition and your proposed policy framework--by ``absolute'' tax cut?
Answer. If confirmed, I look forward to working on measures that
lower the tax burden on the middle-class and working families.
Question. You have repeatedly mentioned that a middle-class tax cut
is the centerpiece of your tax reform. What middle-class taxes do you
actually intend to cut?
Answer. President Trump made it clear throughout the campaign that
his commitment was to tax relief for the middle class. If confirmed, I
will work with President Trump and Congress to ensure that middle-class
families are not further burdened by higher taxes.
Question. As noted above, you have repeatedly mentioned that a
middle-class tax cut is the centerpiece of your tax reform. Will these
middle-class tax cuts make up for the premium tax credits that will be
lost to ACA repeal?
Answer. If confirmed, I will work with the Secretary of Health and
Human Services to determine the economic impact of any changes to ACA.
Question. The incoming administration has promised to repeal the
Affordable Care Act. To help leverage health coverage for 20 million
Americans who would otherwise go without health care, the ACA levies a
number of taxes on couples who earn more than $250,000. This includes a
0.9 percent payroll surtax on income earned over $250,000 and a similar
3.8 percent surtax on net investment income. Do you agree that
eliminating these specific tax provisions within the ACA would reduce
the taxes paid by high income individuals--while depriving the ACA with
a source of funding and providing no tax relief to working families?
Answer. The President's top priorities include tax relief for the
middle class and health care that is both affordable to working men and
women and for which deductibles are no longer prohibitive to their
ability to access it. I share the President's commitment and will work
diligently with him and Congress to ensure that these goals are met.
Question. President Trump's plan indicated that itemized deductions
for high-
income individuals would be limited somehow. Could you please state
three specific tax deductions or tax breaks that you plan to eliminate,
which would help achieve the stated goal of avoiding ``absolute tax
cuts for the upper class''?
Answer. If confirmed, I will work with the tax-writing committees,
Congress, and the staff at Treasury to advise the President on the best
course of action for the American taxpayer.
Question. Unlike political campaigns, we in Congress are
constrained by budgetary reality, however painful. The budgetary
reality is, any reasonable limit on popular high-income tax deductions
for wealthy people doesn't provide nearly enough revenue to offset the
scale of the tax rates you're proposing for those same wealthy
taxpayers.
If, as Congress and the administration are crafting tax reform, it
turns out that curtailing deductions neither raises sufficient revenue
nor ensures that the tax code remains as progressive as it is now, what
will be your proposed solution?
Answer. I will work with Congress to make sure that Tax Reform's
primary focus grows the economy, jobs, and incomes for hardworking
Americans.
Question. If Congress ultimately passes a tax reform package that
includes proportionately more tax cuts for wealthy individuals relative
to middle-class families--either as a percentage of the tax cut or as a
percentage of after-tax income of individuals or couples filing
jointly--will you recommend to President Trump that he veto that
legislation?
Answer. We are committed to enacting tax reform that grows the
economy, jobs, and incomes for hardworking Americans. We believe that
the higher growth resulting from tax reform, reduced regulation, and
eliminating the trade deficit will generate significant additional
revenue.
Question. As noted above, President Trump has proposed several tax
reform plans, all of which would substantially increase annual deficits
and total U.S. debt. The plans released would increase the public debt
between $2.6 and $10 trillion, even after accounting for macroeconomic
effects. A likely result from this massive expansion in debt is an
increase in interest rates. What is the administration's plan to
address the increase in borrowing costs for homebuyers, college
students, and businesses?
Answer. Several of the President's economic proposals have
addressed the current and anticipated problems caused by yearly
deficits and increased Federal debt on American taxpayers. If
confirmed, I plan to work with the President and Congress to see that
taxpayers are not forced to bear an incessant burden from an ever-
increasing Federal debt load.
Question. Given that President Trump has repeatedly expressed
concern over the public debt, would the administration reconsider
deficit-financed tax cuts when confronted with the reality that an
increase in borrowing costs will also affect the Federal Government,
which would be required to allocate a larger and larger portion of
current revenues to financing debt?
Answer. The President has spoken frequently about the problems
associated with increased borrowing costs, and I share your and the
President's concerns about this issue. If confirmed, I will work with
all stakeholders to make sure that this issue is less of a burden to
taxpayers.
Question. Last year, President Trump offered a range of comments
regarding the national debt. After first suggesting that as President
he would ``renegotiate'' the national debt, he then later variously
suggested that Treasury bonds might be alternately ``discounted'' or
subject to a ``buy back'' or even ``refinanced'' with longer terms. As
Treasury Secretary, you may be the official who is tasked by President
Trump with somehow restructuring U.S. debt. Do you believe that
renegotiating or otherwise restructuring U.S. debt would be perceived
as a default?
Answer. I am confident that the President supports the full faith
and credit of the debt of the United States, as do I.
Question. With reference to the preceding question, it is difficult
to predict with certainty what the actions of any President will be. If
President Trump orders you to somehow restructure or renegotiate U.S.
debt, what will your response be? Will you comply with such a request?
Answer. As I have indicated in my proceeding response, I am
confident that the President and the Treasury will support the full
faith and credit of the United States and hence commenting on this
hypothetical circumstance is not necessary.
Question. With reference to the preceding two questions, if you
were to receive and attempt to comply with such an order from President
Trump to somehow restructure U.S. debt, would such debt-restructuring
be limited to addressing debt held by other sovereign nations, or would
Treasury bonds held by Americans also be subject to changes?
Answer. The United States has always treated domestic and non-
domestic holders of our debt equally as part of our commitment to our
full faith and credit support of our obligations. As a result, I do not
see the need to offer further comment on this hypothetical
circumstance.
Question. With reference to the previous three questions, if you
were to receive and attempt to comply with such an order from President
Trump to somehow restructure U.S. debt, please outline a concrete plan
as to how you would proceed, step-by-step, to restructure U.S. debt.
Answer. Please see responses to the two previous questions.
Question. The suspension in the debt ceiling enacted in 2015 is set
to be reinstated on March 16th of this year. It is crucial that the
Federal Government be able to meet its legal, financial obligations in
full and on time. However, one of your fellow nominees, Mick Mulvaney,
who President Trump has nominated to be OMB Director, disagrees,
arguing that breaching the debt ceiling is not much of a concern.
Can you tell us, will President Trump call upon Congress to enact a
clean increase in the debt ceiling at the appropriate time?
Answer. The timely enactment of the debt ceiling limit in early
2017 is an important priority for the administration. Delay on this
matter should not be linked to budgetary and other considerations
facing Congress, as the debt limit merely addresses funding the
obligations that the United States has already incurred and does not
address future budgetary commitments.
Question. If Congress does pass a clean increase in the debt
ceiling, what will be your advice to President Trump? Will you
recommend he sign or veto such legislation?
Answer. See response to previous question.
Question. If the debt ceiling is not raised at the appropriate
time--either because of a Presidential veto or Congress fails to act--
what specific actions will you as the Secretary of the Treasury take to
ensure the full faith and credit of the United States?
Answer. If confirmed, my responsibility as Secretary would be to
pursue all means available to the Treasury to meet this commitment,
including historic extraordinary measures that have been employed by
necessity in the past.
Question. In September and October of last year, President Trump
stated, ``It's time to establish a national goal of reaching 4-percent
economic growth'' per year, and at other times suggested that ``I
actually think we can go higher than 4 percent. I think you can go to 5
percent or 6 percent.'' Can you briefly outline for us the
administration's detailed proposals that can be shown empirically to
achieve such high rates of growth?
Answer. We have abundant examples from American history about what
works and does not work. To achieve high rates of real, sustainable
economic growth, tax and regulatory reform must be pro-growth in design
and execution.
Question. As noted above, President Trump has set a national goal
of no less than 4-percent economic growth. You have indicated 3- to 4-
percent growth. The single percentage point difference between
President Trump's minimum threshold (4 percent) and your minimum
threshold (3 percent) is no small matter, but rather, is a difference
of $180 billion per year. My question has three parts.
First, are you in disagreement with President Trump as to how much
growth is possible?
Answer. I agree fully with President Trump about America's economic
potential. It's time that we reform our broken tax code and our
dysfunctional regulatory system to unleash that potential.
Question. Second, what proposed policies or circumstances would
account for such a large 1-percent difference in economic growth rates?
Answer. We have seen many circumstances at 4 percent or higher.
Question. Third, can you articulate a rationale for why President
Trump is revising downward the growth levels that he articulated in
during 2016?
Answer. Nothing has changed. Predicting economic growth is always
difficult. But again, we know what works and doesn't work, and we are
committed to unleashing the potential of the American economy to
achieve high and sustainable rates of growth.
Question. With reference to the previous two questions, is the
incoming administration targeting 3- to 4-percent growth in each of the
next few years, once President Trump-signed legislation goes into
effect?
Answer. To benefit all Americans, President Trump is committed to
maximizing the economy's long-run, sustainable growth rate.
Question. With reference to the previous three questions, if the
Trump administration fails to achieve 4-percent, or even 3-percent,
growth that's been promised in each year, will it be your assessment
that the administration has failed to achieve one of its central policy
objectives? How should the American people hold the administration
accountable for such a failure?
Answer. Our goal is to maximize economic growth.
Question. As noted above, the incoming administration has stated a
goal of achieving 3- to 4-percent economic growth per year. As you
know, population growth is a major component in GDP, and so slowing
population growth therefore presents a significant constraint on
achieving higher growth rates. One solution to this problem is
providing sufficient legal channels for immigrants to come or stay and
work in this country through immigration reform.
As you may know, the nonpartisan Congressional Budget Office
projected that the comprehensive immigration reform bill that passed
the Senate in 2013 would increase GDP by 3.3 percent in 10 years, and
by 5.4 percent in 20 years. Yet, despite the economic growth potential
represented by an increase in immigration levels, some in the incoming
administration have demonstrated antipathy toward immigration and
immigrants from a broad range of nationalities and backgrounds.
Would you agree that boosting immigration levels could help achieve
a higher economic growth rate?
Answer. The President has repeatedly stated his support for legal
immigration.
Question. In reference to the immigration question above, setting
aside the many moral and decency arguments in favor of immigration
reform and focusing solely on the economy for a moment, how would you
work to reconcile the incoming administration's antipathy toward higher
levels of immigration with the goal of achieving high rates of economic
growth?
Answer. The President has reiterated his belief that American
sovereignty requires adherence to immigration laws that have been
passed by Congress. If confirmed, I will work with Congress and the
professionals at Treasury to help make sure that the economy works for
all U.S. citizens.
Question. I'm a strong proponent of clean energy technologies, both
as a source of job creation and as means of reducing dependence on
fossil fuels. In 2015, the tax credits supporting solar and large wind
technologies were extended. However, left behind were companion
technologies also found in section 48 of the tax code, including
advanced fuel cells, combined heat and power, geothermal heat pumps,
small wind technologies, and microturbines.
These tax credits were designed to support manufacturing jobs by
offering economically efficient incentives at a relatively low revenue
cost. Yet, these credits have been allowed to expire.
Emerging, cutting-edge energy companies require predictable tax
incentives for research and development, capitalization, and cash flow
reasons.
This is especially true for transitioning technologies that have a
long lead time to installation--such as fuel cells, which provide
reliable, off-grid power for first responders, manufacturers, and
retail companies. Because of the tax uncertainty created by Congress,
new energy technologies are seeing a boom and bust investment cycle,
which is not good for economic growth or for our energy infrastructure.
Can you tell us how will you work with Congress to extend the
credits for these crucial technologies that have bipartisan support?
Answer. If confirmed, I will get fully briefed on these bipartisan
proposals and will work with the professional staff at Treasury and
with Congress to support solutions.
Question. The incoming administration has promised to repeal the
Affordable Care Act, which provides a tax credit to small businesses
for providing health insurance to their workers. Do you agree that
eliminating this tax credit would increase taxes for small businesses
who are trying to do the right thing by helping their workers secure
health insurance?
Answer. The President has made affordable, accessible health care a
priority in his administration, and I look forward to working with
Congress and the President to achieve this goal.
Question. As noted above, the incoming administration has promised
to repeal the Affordable Care Act, which provides a tax credit to small
businesses for providing health insurance to their workers. Before
eliminating this tax credit, do you agree that we should ensure that
the workers employed by the small businesses using this credit to
provide health insurance will not be left in the cold without access to
insurance and health care?
Answer. If confirmed, I will work with the President to ensure that
Treasury's role in any change to current law is supportive to these
goals.
Question. In an interview shortly after your selection as the
President's nominee for Treasury Secretary, you said that you looked
forward to working with House Financial Services Chairman Jeb
Hensarling on Dodd-Frank issues. Chairman Hensarling has been quoted as
saying that he believes Dodd-Frank has been a failure. Do you believe
that Dodd-Frank has failed to make the financial system safer?
Answer. If confirmed, I look forward to working with Chairman
Hensarling and other members of the House and Senate to develop
legislative solutions that improve U.S. financial system stability.
Question. Last year, Mr. Hensarling introduced a bill, the
Financial Choice Act, to roll back some of Dodd-Frank's most important
provisions. Mr. Hensarling has given every indication that he plans to
reintroduce the Financial Choice Act in the 115th Congress. Do you
support the Financial Choice Act as introduced last Congress? If sent
to the President's desk would you recommend he sign such legislation?
Answer. If confirmed, I look forward to working with Chairman
Hensarling in discussing his bill and working with members of Congress
to ensure that financial regulatory reform legislation consistent with
the President's objectives is signed into law.
Question. Throughout the campaign, now-President Trump vowed to
dismantle Dodd-Frank. What parts of Dodd-Frank would you recommend the
President dismantle?
Answer. I would advise the President and members of Congress on
rules that undermine economic growth and job creation. A particular
focus should be placed on reducing the regulatory costs faced by
community financial institutions, and making sure that small and medium
sized business have access to credit.
Question. Do you support the current Dodd-Frank provision
eliminating the ability of the government to dismantle failed banks?
Answer. I am supportive of comprehensively reviewing all bank
resolution regulations and practices in order to ensure the costs of
failure are appropriately shifted to bank equity and subordinated debt
investors and away from the taxpayers.
Question. Do you support repealing the Consumer Financial
Protection Bureau's explicit authority to protect consumers from
abusive acts and practices?
Answer. If confirmed, as Chair of FSOC, I look forward to
addressing this regulatory issue.
Question. Do you support curtailing the powers of the Financial
Stability Oversight Council, a council you would chair if confirmed?
Answer. I support a comprehensive review of the FSOC's powers and
institutional processes in order to identify opportunities to improve
the Council's ability to achieve its statutory responsibilities to
identify risks to the financial stability of the United States, promote
market discipline, and respond to emerging threats to the stability of
the United States financial system.
Question. As Chairman of the Financial Stability Oversight Council
(FSOC), what sorts of changes would you seek in how the Council
operates?
Answer. The Council's operations are guided by statutory
responsibilities to identify risks to the financial stability of the
United States, to promote market discipline, and to respond to emerging
threats to the stability of the United States financial system. If
confirmed, I will work with colleagues on the Council to ensure these
objectives are met, as well as, consider any needed changes.
Question. The Treasury Department exerts considerable influence
both directly and indirectly over significant portions of the U.S.
economy, including areas that affect the emissions of greenhouse gases.
As such, major problems can be partially address via Treasury actions.
If you become Secretary, what measures will Treasury take in order to
address the significantly and growing problem of climate change?
Answer. If confirmed, I will work with Congress to ensure that
Treasury's work is consistent with the administration's goals on the
environment.
Question. Economic studies are increasingly finding a growing
disparity between the ``return on capital'' and the ``return on
labor.'' What is your assessment of tax reform plans that would further
exacerbate the rate differential between capital gains and ordinary
income? Would a cut to the top capital gain tax rate, relative to the
top ordinary income rate, exacerbate the disparity between different
types of income?
How do capital gains tax cuts benefit working families in, for
example, the manufacturing sector?
Answer. Lower taxes on capital serve to increase private business
investment, which is a key driver of private-sector job creation.
Question. The last time the United States achieved greater than 4-
percent growth was during four consecutive years from 1997 through
2000, as well as in 1994. These periods of high growth all followed the
significant increase in marginal tax rates for high-income taxpayers,
as well as other revenue increases, most of which were enacted in 1993.
Similarly, revenue increases on high-income taxpayers that resulted
from the ``fiscal cliff'' have not negatively affected growth. By
contrast, in the years after the 2001 and 2003 tax cuts, the average
annual growth rate hovered around 2.7 percent--before the financial
crisis. These are real-world examples that provide supporting evidence
for the nonpartisan findings of most economists that tax rates have a
minor to nonexistent effect on growth. Yet the centerpiece of the
incoming administration's plans for growth is tax reform--centered
mainly on rate reductions.
If tax rate-reducing tax reform is enacted, and if in the years
that follow growth rates do not reach the 3- to 4-percent growth rate
that you and President Trump has suggested, what conclusions would you
draw about the relationship between marginal tax rates and economic
growth?
In addition, if tax rate-reducing tax reform is enacted, and if, in
the years that follow, growth rates do not reach the 3- to 4-percent
growth rate that you and President Trump have suggested, then as the
Cabinet's chief economic policymaker, what will your counsel be to
President Trump if further tax rate cuts are suggested? Will you
continue to press for additional tax cuts?
Answer. I agree that President Trump's plan of lower taxes, reduced
regulation, and better trade deals will generate sufficient growth.
Question. The current-law estate tax has the lowest tax rate and
smallest tax base in decades. In 2013, estates valued above $20 million
paid an average tax rate of 18.8 percent--many achieving a lower
effective rate through tax-planning strategies. That same year, only
120 of the 3,780 estates subject to the tax were farms and businesses--
little more than 3 percent. What is the Trump administration's plan
regarding the estate tax?
Furthermore, how does reduction or repeal of the estate tax--a
windfall for individuals at the very top of the income spectrum--
benefit hardworking employees in the manufacturing sector?
Answer. We will work closely with Congress on the estate tax as
part of overall tax reform.
Question. If confirmed, it will be up to you to administer the
Nation's laws that relate to combating currency manipulation. It will
also be your job to represent the United States at the IMF, the OECD,
the G7 and the G20. The Nation will rely on you to use these fora to
work with other countries to ensure that global currencies are not
distorted by government intervention.
The President, before and after the campaign, has promised that he
is going to instruct you to label China a currency manipulator. This
committee has put into law several important pieces of legislation to
defend American jobs by combatting currency manipulation. While we all
agree that China has in the past manipulated its currency--and may well
do so in the future--China appears to have stopped intervening to
devalue its currency in recent years and may even be taking steps to
prevent depreciation. Do you disagree with that assessment?
Answer. Currency manipulation is a serious infraction of free trade
principles and needs to be effectively addressed. As Treasury
Secretary, I will ensure that we defend American jobs by combating
currency devaluation through legislative processes established by
Congress.
Question. It is possible that the incoming President could issue an
executive order instructing you to name China a currency manipulator.
This action runs the risk of undermining your credibility and the
credibility of the United States when we seek to take on currency
manipulation in the future. Would you advise President Trump to avoid
taking actions that undermine the credibility of the United States?
Answer. If confirmed, I will carry out the responsibilities of the
Treasury in identifying currency manipulation by U.S. trading partners.
Question. Mr. Mnuchin, as you know, the President has the authority
to waive certain U.S. sanctions against Iran's energy sector and other
industries if he believes Iran is complying with the Iran nuclear deal.
As part of the deal, President Obama has exercised his authority to
waive these sanctions. What factors would you weigh or encourage
President Trump to consider when advising if he should waive sanctions
as part of the Iran nuclear deal?
Answer. The President has stated his intent to enforce the Joint
Comprehensive Plan of Action (``JCPOA''). In December 2016, Congress
reauthorized the Iran Sanctions Act, extending the President's
authority to enforce sanctions against Iran for another 10 years. As
Treasury Secretary, and in consultation with the Secretary of State, I
will act to fully enforce all existing sanctions against Iran--
including with respect to its sponsorship of terrorism and other
illicit activities. In the course of the President's national security
advisors providing him information indicating the degree to which Iran
is complying with the terms of the JCPOA, I will advise the President
on the options available to him under the various Iran-related
sanctions authorities to either continue waiving certain sanctions or
to reimpose waived sanctions.
Question. The U.S. intelligence community and the International
Atomic Energy Agency continue to monitor Iran's compliance of the
nuclear deal. If both of these entities assess that Iran is largely
upholding its obligations, would you recommend the United States
continue to waive U.S. sanctions currently waived under the nuclear
deal?
Answer. The President has stated his intent to enforce the JCPOA.
As Treasury Secretary, and in consultation with the Secretary of State,
I will act to fully enforce all existing sanctions against Iran--
including with respect to its sponsorship of terrorism and other
illicit activities. To the extent the President's national security
advisors have information from the IAEA or the IC indicating that Iran
is complying with the terms of the JCPOA, then I will advise the
President accordingly on whether currently waived sanctions should
remain as such.
Question. Broadly speaking, beyond the Iran nuclear deal, do you
believe it is within U.S. national security interests to levy
additional or fewer sanctions against Iran at this time?
Answer. The President has stated his intent to enforce the JCPOA,
and Congress recently extended for another 10 years the authorities to
impose and enforce sanctions against Iran in the Iran Sanctions Act. As
Treasury Secretary, and in consultation with the Secretary of State, I
will act to fully enforce all existing sanctions against Iran--
including with respect to its sponsorship of terrorism and other
illicit activities--and to advise the President on whether additional
actions may be necessary to combat Iran's activities outside the scope
of the JCPOA.
______
Questions Submitted by Hon. Benjamin L. Cardin
Question. During the confirmation hearing, I asked you about
President Trump's potential conflicts of interest. I would like to
follow up on that question. As you know, I am very concerned about
possible conflicts of interest with our foreign economic policy that
may arise from our President's overseas business arrangements. If
confirmed, you will be handling some of the most sensitive and
significant negotiations between our country and the rest of the world.
Without financial disclosures by the President, do you have enough
information to avoid conflicts between President Trump and our national
interest?
Answer. Avoiding conflicts of interest is important. I will work
with the professional ethics staff at the Department of the Treasury to
ensure that conflicts are avoided.
Question. For decades, the United States has led a network of
international institutions, from the World Bank to the IMF to what is
now the WTO. They are far from perfect, but they have helped to foster
international coordination in crises from Asia in 1997 to the global
economic collapse of 2008. They have worked to establish guidance and
support for countries in financial crisis, to monitor economies and
trends. And they have promoted predictability and rules for the conduct
of international trade and finance, as well as forums for seeking
important agreements.
Do you agree that these institutions are important to not only our
trade and finance, but to our global leadership?
Answer. I agree that the United States has worked closely with many
international institutions over the course of many years. If I am
confirmed, I will work to ensure that all of our international and
multinational relationships advance the interests of the American
people and promote job creation and opportunity in America.
Question. As we discussed in your confirmation hearing, when you
were nominated last November, you stated that ``[a]ny reductions we
have in upper-income taxes will be offset by less deductions so that
there will be no absolute tax cut for the upper class.''
As far as I can tell from available estimates by the Tax Policy
Center of President Trump's tax plan, the top 0.1 percent (in terms of
cash income percentile) would receive an average tax cut of over $1
million. Those in the top 1 percent would receive an average tax cut of
over $200,000. Tax Foundation modeling also shows that the top 1
percent would have an increased after-tax income, using static scoring,
of at least 10.2%.
What deductions would you repeal or amend to counteract this tax
cut to upper-income households?
Could you please share the calculations your team has undertaken to
make sure that the tax cut for the upper class will be fully offset by
your changes?
If you disagree with the Tax Policy Center and Tax Foundation
estimates on the tax cuts upper-income householders receive, could you
please share the calculations your team has undertaken to show how
their taxable income would change?
If you don't have specific calculations, could you please explain
why you believe your plan does not contain an absolute tax cut for the
upper class?
Answer. President Trump's objective is to pass tax reform that
grows the economy and benefits all Americans. If confirmed, I will work
with President Trump and Congress to ensure that middle-class families
are not further burdened by higher taxes.
Question. With respect to middle-class tax cuts, you've stated:
``When we work with Congress and go through this, it will be very
clear. This is a middle-income tax cut. And the child care credit is a
big aspect of this.'' At the hearing, we discussed how important it
was, to both of us, that any changes to the tax code result in a system
that is at least as progressive as current law. I'm concerned by
analyses by the Tax Policy Center, which show that President Trump's
tax reform plan would raise taxes of middle-class families with
children.
Could you please provide me with specifics of what middle-income
taxes you intend on cutting?
Answer. If confirmed, I will work with you to ensure that we do the
best possible job of helping middle-class working families and
individuals.
Question. Could you please share the calculations that your team
has undertaken to make sure that your plan will be at least as
progressive as the current income tax system?
Answer. At this time, we do not have any specific calculations to
share. We will work with Congress to ensure that tax reform results in
an appropriate distribution of the tax burden.
If confirmed, I will make sure you have the proper analysis of any
proposed plan.
Question. In your hearing, you discussed the importance of economic
growth in offsetting the revenues lost under the President's tax reform
plan. In previous statements, you've also implied that through this
economic growth, higher revenues from individuals would finance
business tax cuts. For instance, you've said, ``[s]o we think that by
cutting corporate taxes, we'll create huge economic growth and we'll
have huge personal income, so the revenues will be offset on the other
side.''
Is it your view that the tax cuts in the President's plan will be
fully offset by economic growth?
Answer. Our objective is to have any tax cuts offset by economic
growth.
Question. If so, could you please share your team's analysis
supporting that position?
Answer. Our objective is to have any tax cuts offset by economic
growth.
Question. Will you commit, as we discussed in our meeting, not to
put forward a plan that will increase the deficit and put our country
in a worse financial position?
Answer. Our objective is to have any tax cuts offset by economic
growth.
Question. I understand that you and others on the President's team
have met with my Republican colleagues in the House on their tax reform
plan, known as the ``House Blueprint.''
Are you concerned about the criticisms that have been levied
against the House plan with respect to increased costs to consumers? Do
you agree or disagree with the analysis that the Blueprint will
increase consumer costs?
Answer. President Trump has stated his support for a tax reform
that would benefit all Americans. If confirmed, I will evaluate any tax
proposals in light of these criteria, and I look forward to working
with Congress in sharing our analysis.
Question. Many trade law experts believe that the border-adjustable
tax embodied in the House Blueprint is not WTO-compliant.
Are you concerned that the House Blueprint, should it become law,
would be challenged by our trading partners and would subject U.S.
companies to potential retaliation?
Answer. I will work with Congress to ensure that tax reform is
enacted that helps American companies compete and that creates, retains
and returns jobs to our shores. As President Trump has said, our tax
and international trade policies must work together to ensure American
companies and workers benefit.
Question. As you may know, the IRS has previously tried to use
private debt collectors to collect tax debt twice in the past. In both
instances, the agency actually lost money. According to data from the
IRS, during the last effort, from 2006-2009, the Treasury ended up
receiving $63.4 million in revenue but paying $67.8 million in costs
(including commissions to private debt collection companies), resulting
in a net loss of over $4 million.
Of non-commission administrative costs, a significant portion was
dedicated to protecting taxpayer data--an issue I know you are
particularly concerned about. Using private collection agencies adds
another, non-governmental party into a transaction and could jeopardize
taxpayer privacy. This is exacerbated by the fact that using private
debt collection agencies has provided another route for tax scammers to
fraudulently obtain taxpayer data by imitating private collection
agents.
In addition, close to 80% of those cases that are required to be
turned over to private collections involve taxpayers below the poverty
limit, according to IRS data. These households are often experiencing
extreme economic distress and so would not be able to pay this debt,
regardless of whether the IRS or private collection agencies were the
collection agent.
Finally, for those taxpayers who can pay, I'd also point out that
unlike the IRS, private collection agencies have no authority to enter
into offers in compromise and have no access to other tools that could
make successful collection more likely.
Do you favor the use of private collection agencies to collect tax
debt?
If so, how would you address the problems mentioned above?
Answer. I believe the IRS should be responsible for collecting most
money due the Treasury. When there is such a large amount outstanding,
using private agencies seems to be an appropriate solution. To the
extent that there are problems, if confirmed, I am committed to working
with Congress to resolve those issues.
Question. President Trump has consistently mentioned infrastructure
investment as a major priority for his administration. A key part of
any effective infrastructure program should be improving our existing
commercial and residential building stock. Energy efficiency provisions
in the tax code, such as the energy efficient commercial buildings
deduction (section 179D), have been shown to achieve this goal while
creating jobs in the construction and design industry and improving the
energy usage by buildings to the benefit of taxpayers.
Are you willing to work with me to ensure that energy efficiency
measures are included in any Trump administration infrastructure plan?
Answer. If confirmed, I look forward to helping fulfill the
President's pledge to revitalize America's crumbling infrastructure,
including through whatever reviews and procedures fall to the
Department of the Treasury in that process. I would look forward to
working with your office to solicit your views and input.
Question. During my recent meeting with you, we spoke about my
commitment to retirement and savings issues. I believe that
significant, bipartisan work can be done next Congress to ensure that
all Americans have a dignified and secure retirement, including by
expanding saving opportunities through employer-based retirement plans.
Employer-based retirement plans like 401(k)s are a critical
component of our Nation's retirement system. Over 60 million workers
participate in these plans, the majority of whom are in lower- or
middle-income households that need support in saving for retirement.
Current tax incentives encourage employers to establish and maintain
these savings plans as benefits for their workers, a critical decision
factor, particularly for small business owners, who must balance a
number of competing financial priorities.
I also strongly support the retirement measures unanimously
reported out of the Finance Committee last September, including the
noncontroversial measures in the Retirement Enhancement and Savings
Act. These smaller provisions would have a large impact on the
promotion of retirement security and savings. For instance, with
Senator Portman, I cosponsored an amendment that would prevent hundreds
of thousands of defined benefit plan participants from having their
benefits curtailed through an unintended effect of the
nondiscrimination testing rules applicable to those plans. I also
cosponsored amendments that would clarify current law to ensure that
all church-related organizations have the ability to participate in
church 403(b)(9) retirement plans, and streamline the law with respect
to IRAs owning S Corporation shares.
Should you serve as Treasury Secretary, I hope that we can work
together to get these provisions across the finish line.
More broadly, will you commit to expanding savings opportunities,
especially for low- and middle-income Americans, in any Trump
administration tax reform plan?
Answer. The lack of retirement savings is a major concern for
families across America. If confirmed, I pledge to work with Congress
to pass comprehensive reforms that simplify the tax code and make it
easier for families to improve their lives today and tomorrow.
Question. President Trump has repeatedly indicated that he wants to
address poverty and joblessness in America. He has also emphasized the
need to help those who have lost their jobs because the company they
were working for moved overseas as well as the desire to encourage
businesses to relocate back to the United States.
One of the programs for which the Treasury Department shares
responsibility with the Department of Labor is the Work Opportunity Tax
Credit (WOTC). WOTC helps over 1.3 million Americans find work in the
private sector. Studies by Dr. Peter Cappelli, a Wharton School of
Business Labor Economist, indicate that the program more than pays for
itself in savings from entitlement programs and that employers using it
change their hiring practices to hire those who are eligible.
Will you work with our office to make WOTC a permanent part of the
President's goal of reducing poverty, encouraging companies to bring
jobs back to the United States, and helping Americans displaced by
overseas competition?
Answer. Bringing jobs back to the United States and helping
American workers displaced by factories moving overseas are
cornerstones of the President's platform, so I join you in your desire
to encourage businesses to relocate back to the United States. If
confirmed, I will work with you and all stakeholders to ensure that
economic incentives are aligned to facilitate job creation and business
relocation here in the United States.
Question. During his campaign, the President often mentioned his
intention to revitalize low-income urban neighborhoods and to encourage
job creation through infrastructure investment. Credits like the New
Markets Tax Credit program and Historic Tax Credit program have been an
important factor in the revitalization of communities across the
country, including in my hometown of Baltimore.
Working with Senator Blunt, Senator Schumer and others I was
pleased that NMTC was extended for 5 years in the bi-partisan PATH Act
of 2015. I intend to introduce bipartisan legislation in this Congress
to make NMTC a permanent part of the tax code.
Since the credit was launched in 2001, $38 billion in direct NMTC
investments were made in businesses and these NMTC investments
leveraged over $75 billion in total capital investment to businesses
and revitalization projects in communities with high rates of poverty
and unemployment.
This financing has resulted in the creation of 750,000 jobs and the
financing of commercial and industrial facilities, day care and health-
care centers, mixed-use facilities, and small business loans, all of
which improve local economies and the quality of life in distressed
neighborhoods.
In Maryland, some $800 million in NMTC capital has leveraged more
than $2 billion in other financing for a range of projects and created
over 25,000 construction jobs and more than 7,000 permanent jobs.
NMTC has been an important factor in the revitalization of East
Baltimore and the establishment of a Life Sciences Building that is a
key element of a large effort to support business and civic leaders to
revitalize that area. It is also a key financing source for a new
facility at Baltimore's Maryland Institute College of Art, as well as a
new business incubator that will foster the growth of entrepreneurial
food vendors.
Another infrastructure and community development program that has
seen similar success and bipartisan support is the Historic Tax Credit.
Working with Senator Collins, I've introduced--and plan to
reintroduce--legislation that would encourage economic development and
job growth across the country by making common-sense changes and
enhancements to the Federal HTC.
Since the creation of the credit, the HTC program has generated $78
billion in historic preservation activity to rehabilitate more than
41,250 historic properties, including the creation of over 525,000
housing units, of which approximately 150,000 are low and moderate-
income units. Historic preservation programs have created more than
2.36 million jobs nationwide since 1978 (85,058 new jobs in FY 2015). A
recent study by the National Trust for Historic Preservation estimates
that every $1 of credits generates a minimum of $4 of private sector
investment.
In Maryland, the Federal HTC has supported hundreds of projects
that have spurred economic growth in communities around the State,
ranging from the development of a multicultural service center to
affordable housing units for teachers and office space for nonprofit
educational organizations.
Given the President's goals, do you agree that credits like the
NMTC and HTC can play a critical role in community redevelopment and
infrastructure?
Can you commit to retaining these important incentives in a Trump
administration tax reform package?
Answer. Our objective is to grow the economy and economic
opportunity. If confirmed, I will work with you and other members of
Congress to ensure that the appropriate incentives are retained.
Question. As we have discussed, IRS resources have been extremely
constrained due to recent budget cuts. As a result, it is difficult for
the IRS to reach many lower-income, rural, or elderly taxpayers who
require assistance or guidance filing their tax returns.
Last year, Volunteer Income Tax Assistance (VITA) programs made up
for this service shortfall by helping to file returns for these
taxpayers, returning about $56 million in refunds to just over 50,000
Marylanders.
Do you support Volunteer Income Tax Assistance programs and the
role they play in helping vulnerable taxpayers promptly and accurately
file their returns?
Answer. I will work with your office to review the issues
associated with Volunteer Income Tax Assistance grant programs.
Question. Along with my colleague Senator Roberts, I have co-
authored legislation that will encourage employee ownership and the
creation of more Employee Stock Ownership Plan (ESOP) companies. Last
Congress, the bill had 35 bipartisan cosponsors, including 12 from the
Finance Committee. ESOP companies are proven job creators, while also
providing meaningful retirement savings to their employee owners.
Will you commit to working with Congress to promote employee
ownership and ESOPs?
Answer. If confirmed, I commit to work with Congress to evaluate
these proposals and any others that promote income growth and
opportunity for working Americans.
Question. There is a significant number of tax treaties and
protocols pending before the Senate. These treaties are very important
to many U.S. businesses, including companies in my home State of
Maryland.
Do you support the timely ratification of these treaties?
Answer. If confirmed, I look forward to the opportunity to receive
a more comprehensive briefing regarding any pending agreements and
protocols, and to working with the Senate to promote international
agreements that promote jobs, economic growth and opportunities for
Americans.
______
Questions Submitted by Hon. Sherrod Brown
Question. Mr Mnuchin, in addition to Senator Heller's request for
foreclosure data in Nevada, would you please provide a state-by-state
breakdown of the foreclosures initiated by OneWest? Would you also
provide a breakdown of the number of permanent HAMP modifications as
well as the number of permanent propriety modifications that OneWest
completed while you were chairman?
Answer. Because I am no longer employed by or affiliated with CIT
Group, I do not have access to this information.
Question. Mr. Mnuchin, I understand that OneWest sent a letter to
the OCC explaining the problems in the HECM book of Financial Freedom
when you were seeking approval for a merger with CIT, but you
referenced a 2015 letter that you sent to HUD. Would you provide the
committee a copy of the letter referenced in your testimony?
Answer. Because I am no longer employed by or affiliated with CIT
Group, I do not have access to this information.
Question. OneWest/CIT has had several allegations leveled against
it for violating rules or laws administered by HUD or FHA. What
processes or protections have you, or will you, and Dr. Carson put in
place to ensure that HUD, FHA, and its Inspector General has a fair
process for evaluating your former institution's dealings with HUD and
FHA, and that HUD, FHA, and the Department of Justice are impartial and
not influenced in an improper manner?
Answer. Because I am no longer employed by or affiliated with CIT
Group, I do not have access to this information.
Question. Mr. Mnuchin, of the loans originated by IndyMac that you
then purchased, would you provide the number of 30-year, fixed-rate
loans; adjustable rate mortgages; 2/28 adjustable rate mortgages; and
no documentation loans? Would you also provide the number of agency
(Fannie Mae, Freddie Mac, FHA) loans serviced by OneWest?
Answer. Because I am no longer employed by or affiliated with CIT
Group, I do not have access to this information.
Question. Mr. Mnuchin, President Trump's nominee for HUD Secretary,
Dr. Ben Carson, raised questions about the continuation of the 30-year,
fixed-rate mortgage in his confirmation hearing.
Do you believe the widely available 30-year fixed-rate mortgage is
an important aspect of our housing market?
What would happen to home equity and home values if access to the
30-year fixed rate decreased or if the product became more expensive?
You mentioned that you want to seek a housing finance market
solution that doesn't put taxpayers at risk or eliminate capital for
the housing market. Given that retained capital at the GSEs will be
zero a year from now, can you provide more information about a solution
that protects taxpayers, maintains capital, and expands access and
affordability for borrowers who can sustain homeownership?
Answer. Because I am no longer employed by or affiliated with CIT
Group, I do not have access to this information
Question. On December 21, 2016, I sent you a letter asking a series
of questions, which you have not responded to, but you have said you
will respond to. I am submitting those questions again.
As a former partner at Goldman Sachs, reportedly overseeing the
mortgage trading desk, you have described structured financial products
as ``an extremely positive development in terms of being able to
finance different parts of the economy and different businesses
efficiently.'' What are your views on the role these products played in
the financial crisis of 2008? Will you be a strong defender of the
regulatory framework created by Dodd-Frank for complex securities and
derivatives? If not, why not?
Answer. It has been over 6 years since the passage of Dodd-Frank,
and it seems like an appropriate time to review all of the regulations
from Dodd-Frank to understand their impact on the market, investors,
small businesses, and economic growth.
Question. As someone who purchased a failed thrift at a price
subsidized by American taxpayers and accompanied by a generous loss
sharing agreement provided by a government-run insurance fund, what are
your views on the most effective ways to prevent bank failures?
Answer. As two senior FDIC officials wrote in the January 19, 2017
issue of the Wall Street Journal, the bid my colleagues and I submitted
to buy the IndyMac assets was almost $1 billion more than the next best
bid. It was the only bid that preserved the institution and its
thousands of jobs more or less intact. As I have previously said, the
best way to avoid bank failures in the future is to restore sound
underwriting practices.
Question. As chairman and CEO of a financial institution that has
been labeled a ``foreclosure machine'' do you believe the Federal
Government should maintain its loss mitigation and foreclosure
prevention programs or not? Will you support the regulatory efforts of
the Office of the Comptroller of the Currency, including those
affecting mortgage servicers or not?
Answer. The current modification programs are not within the
purview of Treasury, as they are administered by HUD, FHFA, and certain
other agencies. Treasury's Home Affordable Modification Program no
longer accepts application from home owners. The program ended
acceptance of applications on December 30, 2016.
Regarding the regulatory efforts of the OCC, I will support its
efforts to ensure that national banks and Federal savings associations
operate in a safe and sound manner and comply with applicable laws and
regulations, and encourage loan modifications where applicable.
Question. As a former executive at a bank that has been accused of
``failing to effectively market, offer, and originate mortgage loans
and other loan products in communities of color,'' what are your views
on the importance of fair lending laws?
Answer. The Federal fair lending laws--the Equal Credit Opportunity
Act and the Fair Housing Act--prohibit discrimination in credit
transactions, including transactions related to residential real
estate. In enacting the Equal Credit Opportunity Act of 1974, Congress
found a need to insure that the various financial institutions and
other firms engaged in the extensions of credit exercise their
responsibility to make credit available with fairness, impartiality,
and without discrimination. Congress further found that economic
stabilization would be enhanced and competition among the various
financial institutions and other firms engaged in the extension of
credit would be strengthened by an absence of discrimination. I agree
with these very important findings.
Question. As a recent former board member of a large regional bank,
what are your views on the proper role of regulation in overseeing
large regional banks?
Answer. I believe that banks that have FDIC insurance should be
appropriately regulated. however I believe in a regulatory framework
that is determined by complexity and activity, not simply size.
Question. As a former executive of a bank, you know that the
Treasury Department has been at the forefront of our Nation's national
security policy through the use of economic sanctions and targeted
financial measures, as you oversaw compliance efforts in this area. In
light of the continuing threat from terrorist financing, money
laundering, and other illicit finance risks to our financial system,
what role do you see the Treasury Department playing in this area?
Answer. The Office of Terrorism and Financial Intelligence marshals
the intelligence and enforcement functions with the twin aims of
safeguarding the financial system against illicit use and combating
rogue nations, terrorist facilitators, weapons of mass destruction
proliferators, money launderers, drug kingpins, and other national
security threats.
Question. As a hedge fund partner, will you, as Chair of the
Financial Stability Oversight Council, continue the efforts of the
Oversight Council to address the risks that so called shadow banks and
other non-banks might pose a risk to the economy?
Answer. If confirmed as Chairman of FSOC, I will review the work
the council has done on so-called shadow banks and non-banks to analyze
the risk that they pose to the economy.
Question. How will your past business--and presumably social--
connections to hedge fund partners who invested in preferred shares of
the Government Sponsored Enterprises, Fannie Mae and Freddie Mac,
inform your views on efforts to reform those enterprises?
Answer. My business and social connections will have no impacts on
my view for housing reform. My views are a result of over 30 years
experience in housing finance.
Question. You recently stated that, ``We've got to get Fannie and
Freddie out of government ownership. It makes no sense that these are
owned by the government and have been controlled by the government for
as long as they have . . . [W]e gotta get them out of government
control.'' Please explain what you meant by this statement.
Answer. We should work on housing reform such that Fannie Mae and
Freddie Mac do not continue in conservatorship for the next 4 years.
Any solution needs to make sure that we do not put the government at
risk again while making sure the solution provides necessary liquidity
for housing.
Question. Finally, though the law requires that you recuse yourself
from participating in decisions that could benefit you or your close
family financially, what additional steps will you take to provide
Congress and the American public confidence that you are not using the
power of the United States Treasury to benefit your current or former
business partners, or disadvantage their competitors?
Answer. I will follow all rules and guidance related to standards
of ethical conduct for employees of the Department of the Treasury and
the executive branch, as well as any other applicable rules identified
by the Office of General Counsel of the Treasury Department.
Question. The December 21, 2016 letter also included the following
question: as a former executive at a bank that merged with a large
regional bank under your leadership, please describe the investigation
currently being conducted by the Office of the Inspector General of the
Department of Housing and Urban Affairs, your involvement at OneWest
during the period in question, and whether any continued cooperation
with this investigation will impair your ability to serve as Secretary
of the Treasury.
Answer. I have had no involvement in the HUD investigation, so I
have no reason to believe it will impair my ability to act as Secretary
of the Treasury.
Question. In 2014 and 2015, many of your business dealings
converged. In October 2014, you joined the board of directors of
Relativity Media as non-executive co-
chairman. Around the same time, Dune Capital Investment (Dune Capital
Partners IV), a fund you managed, invested in Relativity, and your
bank, OneWest, loaned hundreds of millions of dollars to Relativity
Media. Please answer the following questions.
What were your responsibilities as non-executive co-chairman of
Relativity Media's Board. How much were you compensated while you
served on the Board?
Answer. I had no management responsibilities. My role as non-
executive co-chairman was similar to any non-executive chair role of a
business. I received no compensation for serving in this role.
Question. At the time you joined Relativity's Board, how much had
OneWest loaned or invested in Relativity, and how much more did it lend
or invest between October 2014 and May 2015 when you left the Board?
Answer. OneWest did not make any equity investments in Relativity.
In response to the committee staff questions dated January 4, 2017, I
requested information from OneWest/CIT regarding the banks extensions
of credit exceeding the Regulation O disclosure requirements. The
information I received was provided to the committee staff on January
12, 2017. In response to the committee staff questions dated January
13, 2017, I requested additional identification of each loan. The
information I received from OneWest/CIT was provided to the committee
on January 18, 2017.
Question. What was the total investment (debt and equity) that Dune
Capital Investment (or Dune Capital Partners IV or other related funds)
made in Relativity Media. How much did you personally invest in
Relativity?
Answer. Dune Capital Partners IV originally invested roughly $78
million. My related entities invested $26 million. I personally had
beneficial ownership in $10.5 million through my ownership of STM
Partners.
Question. When you left the Relativity Board in May 2015, did you
know, or based on your financial expertise realize, that Relativity was
going to have to declare bankruptcy? When did you know that OneWest was
going to sweep funds from Relativity's accounts?
Answer. I was aware that board was discussing the possibility of
declaring bankruptcy. I was not involved in any discussion as it
relates to OneWest sweeping funds from Relativity's accounts.
Question. Did your resignation from the Relativity Board have
anything to do with OneWest's upcoming withdrawals or your knowledge of
it?
Answer. No.
Question. How much money did OneWest lose when Relativity declared
bankruptcy? How much did Dune lose? How much did you personally lose?
Answer. OneWest was a secured lender and did not lose money when
Relativity declared bankruptcy. As information has been previously
supplied to the committee, the majority of the OneWest loans have been
paid off.
Question. In the confirmation hearing, you claimed that Relativity
Media did not receive Chinese investment. Yet news reports, such as an
article in the Los Angeles Times (``Relativity Media expands in China
with the new deal, partners,'' June 16, 2014), identified two ``new
Chinese partners'' in Relativity Media as Jiangsu Broadcasting Corp.
and Seedshine Capital. The article quoted your friend and Relativity
Media chief executive Ryan Kavanaugh about the Chinese partnership:
``The partnerships . . . will deepen our relationship with the Chinese
media and entertainment industry and provide a world-class platform
from which to co-develop Chinese and international film and television
content from two leading organizations.'' Having considered this
information, please explain the nature of the business relationship
between Relativity, Jiangsu, and Seedshine. Would you still testify
before the Finance Committee that Relativity Media had no Chinese
investors?
Answer. To the best of my knowledge, these entities were not
investors in Relativity Media Holdings, which was the question I was
answering.
Question. Do you have concerns about Chinese investors increasing
their financial stake in Hollywood as a way of increasing their so-
called ``soft power'' in the world?
Answer. I believe that these acquisitions may need to be reviewed
by CFIUS, as appropriate.
Question. As I mentioned in the confirmation hearing, I am
concerned that the U.S. Government has not been tough enough on China,
and American workers, particularly in the steel and aluminum
industries, have paid the price. What specific tools and authority at
Treasury will you use to address these unbalanced trade relationship
and increase China's compliance with its international trade
obligations? How do you see Treasury policies and actions benefiting
laid off steelworkers in Lorain, OH?
Answer. Treasury has congressional authority to examine the
exchange-rate practices of major trading partners to identify nations
that engage in currency manipulation. I will work with the Secretary of
Commerce to help ensure that the trade laws of the United States are
enforced. I will also work with Congress to ensure our trade laws
adequately address harm to our industries and workers from unfair trade
practices.
Question. Do you think the Strategic and Economic Dialogue has been
successful in getting concrete commitments from the Chinese?
Answer. The U.S.-China Strategic and Economic Dialogue as I
understand it, has provided a useful bilateral forum to discuss a broad
range of issues between the two nations. I hope to use this forum to
promote the economic interests of American workers.
Question. What goals would you have for the Strategic and Economic
Dialogue in your first year as Treasury Secretary?
Answer. If confirmed, I would work to ensure that the S&ED process
focuses on improvements in trade and other financial relationships
between the United States and China, with focus on positive economic
results for American workers and American companies.
Question. In your testimony to the Finance Committee, you said that
you would not commit to developing or making public a comprehensive
plan to address global overcapacity in the steel industry within the
first month on the job. You did, however, commit to meeting with me on
the topic. I look forward to scheduling that meeting very soon. In
advance of that meeting, please describe what you think are the biggest
causes of global steel overcapacity and what the U.S. objective should
be in addressing global overcapacity.
Answer. I appreciate your interest in addressing the problem of
global overcapacity in the steel industry and would look forward, if
confirmed, to meeting with you to examine the causes and discuss
potential remedies. I will ask Commerce Secretary Wilbur Ross to join
me, who also has experience in this area.
Question. Do you think the United States should negotiate a
bilateral free trade agreement with China? Do you think the United
States should continue negotiations of the U.S.-China Bilateral
Investment Treaty?
Answer. If confirmed, I will seek to work with my counterpart in
China to promote fair and open access to Chinese markets, on terms that
do not discriminate against or disadvantage American companies.
Question. Do you think Chinese state-owned enterprises should be
allowed to invest in the United States, either through an acquisition
or a greenfield project?
Answer. Under current law, CFIUS is required to review an
acquisition or investment by a foreign entity that would give it
control over a U.S. person to determine whether the transaction might
have an impact on our national security. If confirmed, I would strongly
object to any transaction that, in the course of review, is determined
to potentially endanger the safety of our citizens.
Question. Over the last several years, the Committee on Foreign
Investment in the United States (CFIUS) has reviewed an increasing
number of Chinese acquisitions of U.S. companies, some in industries
viewed as strategic investments by the Chinese Government. Some of the
acquirers or investors have ties to Chinese state-owned enterprises and
/or the Chinese Government. Will you commit to a strong CFIUS review
process and appropriate resources for all reviewable acquisitions,
including but not limited to Chinese investments that raise national
security concerns.
Answer. If confirmed, I pledge to ensure a strong CFIUS review
process for all reviewable transactions.
Question. Do you think the International Monetary Fund has been
effective in addressing currency manipulation globally?
Answer. The IMF and other multilateral institutions do not appear
to have prevented nations from manipulating the value of their own
currencies.
Question. Do you think the United States should enter into a
bilateral or multilateral trade agreement with a trading partner that
has a history of manipulating its currency?
Answer. The United States should enter into trade agreements that
allow for fair and equal access to foreign markets on terms that do not
discriminate against American businesses, that benefit American workers
and create opportunity for Americans.
Question. What is the most effective action the Treasury Secretary
can take to address currency undervaluation in one of our trading
partners? Do you think prohibiting the Overseas Private Investment
Corporation from approving any new financing in a country will be a
significant enough action that results in countries changing their
exchange rate policies?
Answer. The Trade Facilitation and Trade Enforcement Act of 2015
provides specific actions to be taken if a Nation is found to
manipulate its currency, and such Nation refuses to modify its
activities. If confirmed, I pledge to fully enforce the law, as well as
work with Congress to the extent further remedies are deemed to be
necessary.
Question. Did you or any entities that you owned or managed ever
have any role, relationship, or transactions with Ingenious Media
Holdings, plc, or Ingenious Capital Holdings Ltd., or any of the
entities they owned or controlled with respect to the financing or any
aspect of the production of any film? If so, did you claim any
deduction for any investment in any of those films that were later
denied by a tax authority?
Answer. To my knowledge, neither I nor any entities that I owned or
managed had any investment in or relationship with Ingenious Media
Holdings, plc, or Ingenious Capital Holdings Ltd., or entities owned or
controlled by Ingenious.
Question. Does the administration support making the New Markets
Tax Credit permanent and expanding the size of the annual allocation to
meet demand?
Answer. The Trump administration is committed the growing the
overall economy and improving efficiency in our tax code. If confirmed,
I pledge to use these principles as guidelines when working with
Congress to enact measures that will assist in meeting our common goal
of reducing overall tax burden while growing the economy.
Question. Do you agree that better enabling law enforcement to
obtain the identities of the beneficial owners of shell companies would
help law enforcement to uncover and dismantle criminal networks?
Answer. I agree that law enforcement's anti-money laundering
efforts face serious challenges if it is unable to determine the
beneficial ownership of the various companies and entities that utilize
the U.S. financial system. This is a real vulnerability with regard to
transparency that various bad actors, including terrorists and
criminals, can exploit, and I will support appropriate efforts that
seek to fill this gap.
Question. Would you be willing to work with the bipartisan group in
Congress and the financial institutions who have supported the
collection of meaningful beneficial ownership information by
authorities at the time of incorporation?
Answer. If confirmed, I would look forward to working with Congress
and the various equities impacted by beneficial ownership due diligence
requirements to address the issue of collecting beneficial ownership
information.
Question. Do you support Volunteer Income Tax Assistance programs?
VITA volunteers have a 94% return accuracy rate. Will you support
authorization of the Volunteer Income Tax Assistance grant program?
Answer. I will work with your office to review the issues
associated with Volunteer Income Tax Assistance grant programs.
Question. Will the Trump administration's tax reform plan encourage
capital formation by expanding this savings opportunity for middle-
income Americans, many of whom currently lack this option, and as a
result are not saving, or not saving enough?
Answer. The Trump administration is committed to reducing the
complexity and overall burden of the tax code for all Americans,
especially lower- and middle-
income earners. I pledge to work with Congress to determine measures
that will achieve our common goals of reducing the tax burden for
struggling Americans and encouraging economic growth.
Question. Do you support repealing carried interest?
Answer. Our proposed tax reform plan will recommend repealing
carried interest on hedge funds.
Question. Do you support a refundable saver match?
Answer. If confirmed, I look forward to working with Congress on
what the best course would be for the American people.
Question. Do you agree that it is irresponsible to condition
raising the debt limit on other policy changes?
Answer. If confirmed, I would hope that Congress will raise the
debt limit as needed.
Question. Should anyone who works full-time have after tax income
below Federal poverty standards?
Answer. One of the primary goals of the Trump administration is to
grow incomes for lower- and middle-class Americans. Through significant
tax reform and regulatory changes, it is our intention to unlock the
economy so more Americans have access to greater opportunities and
higher incomes.
Question. What evidence will you cite to justify that cutting tax
rates while reducing or holding government spending static will result
in 4 percent economic growth? Please provide historical examples?
Answer. If confirmed, I pledge to work with Congress on how to grow
our economy while balancing the fiscal affairs our of government and
advise President Trump on the best course of action.
Question. Should derivative positions be marked to market for tax
purposes?
Answer. If confirmed, I look forward to working with Congress to
determine the best course of action on this issue.
Question. Is Last In First Out accounting an appropriate method for
some companies to keep records?
Answer. As part of any comprehensive tax reform, we will study and
consider the impact of this issue.
Question. Please list three ways we can expand the Earned Income
Tax Credit and the Child Tax Credit to promote work.
Answer. I look forward to working with your staff on this issue.
Question. What are the best tools, within the jurisdiction of the
Treasury, to improve outcomes for children?
Answer. We believe that the best tools are to incorporate into tax
reform incentives for child care and elderly care.
Question. Do you believe implementing Pigouvian taxes is an
appropriate way to achieve policy goals?
Answer. It is our goal to comprehensively review and change the tax
code, so that it is a fairer and more efficient system that encourages
economic growth. If confirmed, I pledge to work with Congress on how to
best achieve these results.
Question. What is your position on the MyRA program?
Answer. We should, in a bipartisan fashion, work to increase
retirement savings for all Americans. This should be an essential
feature of overall tax reform. If confirmed, I would look forward to
working with Congress on any measures that achieve this.
Question. Do you support preserving section 1031 in tax reform?
Answer. If confirmed, I pledge to examine section 1031 and give it
the attention it merits.
Question. Do you support expanding the capacity of the VITA
program?
Answer. I will work with your office to review the issues
associated with Volunteer Income Tax Assistance grant programs.
Question. Is it appropriate and fiscally responsible to ask private
debt collectors to pursue debts that the IRS believes are
uncollectible?
Answer. I believe the IRS should be responsible for collecting most
money due the Treasury. However, when there is such a large amount
outstanding using private agencies it ``seems like a very obvious thing
to do.'' To the extent that there are problems, if confirmed, I am
committed to working with Congress to resolve those issues.
Question. In light of systemic changes to the U.S. economy over the
last 4 decades, is the section 784 safe-harbor still relevant policy?
Answer. Per the President's commitment to reforming the tax code,
this and many other sections will be scrutinized to determine their
relevancy in the current economic climate. If confirmed, I will work
with Congress and the President to ensure that the tax code works best
for the economy and for U.S. taxpayers.
Question. What steps would you take to modernize private activity
bonds?
Answer. Private activity bonds are a valuable way to incentivize
private investment in America's infrastructure. There are areas where
we can improve private activity bonds, including changing volume caps
for certain types of projects. If confirmed, I plan to review ways to
enhance private activity bonds with the goal of driving more private
investment into American infrastructure.
Question. What are your views on ways to strengthen the American
Opportunity Tax Credit?
Answer. If confirmed, I will look forward to discussing with your
office your views on the American Opportunity Tax Credit.
Question. In December 2015, the IRS issued Revenue Procedure 2015-
57, which addresses the taxability of student loan discharges under the
Department of Education's Defense to Repayment Process. Under the
Defense to Repayment Process, the Department of Education is required
to discharge a ``Federal Direct Loan if a student loan borrower
establishes, as a defense against repayment, that a school's actions
would give rise to a cause of action against the school under
applicable State law.'' The IRS determined that while the Higher
Education Act does not provide a statutory exclusion from gross income
that a taxpayer could exclude amounts discharged under this process
from gross income under a provision of the code or other tax law
authorities, specifically that most borrowers whose Corinthian student
loans are discharged under the Defense to Repayment discharge process
would be able to exclude from gross income all or substantially all of
the discharged amounts based on fraudulent misrepresentations made by
the colleges to the students, the insolvency exclusion, or other tax
law authorities. They also stated that determining whether one or more
of these exceptions is available to each affected borrower would
require a fact intensive analysis of the particular borrower's
situation to determine the extent to which the discharged amount is
eligible for exclusion under each of the potentially available
exceptions and that the Treasury Department and IRS believe that such
an analysis would impose a compliance burden on taxpayers, as well as
an administrative burden on the IRS, that is excessive in relation to
the amount of taxable income that would result. Accordingly the IRS
decided that it would not assert that a taxpayer who attend Corinthian
who were eligible for Defense to Repayment would have their loan
discharge recognized as gross income. On January 19th this was extended
to students who attended American Career Institutes and had their loans
discharged via the Defense to Repayment process. Will you ensure that
any Corinthian or American Career Institutes student who has their loan
discharged under the Defense to Repayment process will continue to have
this discharge excluded from the taxpayer's gross income? Will you
extend this guidance to student who attended other institutions who
also have their loans discharged via the Defense to Repayment process?
Answer. If confirmed, I would look forward to working with you on
what the best course would be for the American people.
Question. On January 17, 2017, the Department of the Treasury and
the Department of Education announced that they signed a Memorandum of
Understanding (MOU) establishing a framework regarding the requirements
for electronically sharing tax data over multiple years for Federal
student loan borrowers participating in Income-Driven Repayment (IDR)
plans. Will you commit to supporting this MOU?
Answer. If confirmed, I would look forward to working with you on
what the best course would be for the American people.
Question. What do you think will be the effect of the border tax
proposal in the House Tax Reform plan? Is it true that the export
subsidy will cause profitable U.S. corporations to never pay Federal
income taxes again?
Answer. As I mentioned earlier, I am committed to working with
Congress to craft the best possible tax reform plan to serve all
Americans.
Question. Are you aware that the export subsidy is paid for with an
import tax that in some cases is 3 to 5 times larger than a retailer's
profits and can only result in a large price increase for middle-class
consumers--in other words, the export subsidy will be paid for by
middle-class consumers.
Answer. Per the President's stated commitment to tax reform, this
and many other externalities resulting from the current tax code will
be scrutinized. If confirmed, I will work with Congress and the
President to reform the tax code so that it meets with the President's
fiscal priorities.
Question. Many of the foremost exchange rate experts say that the
dollar would have to strengthen by 25% to offset the cost of the tax.
What are the negative implications to the economy of the dollar
strengthening by that much?
Answer. The strength of the dollar has historically been tied to
the strength of the U.S. economy and the faith that investors have in
doing business in America. From time to time, an excessively strong
dollar may have negative short-term implications on the economy.
Question. Do you believe that the dollar strengthening would cause
a huge transfer of wealth to foreigners who own U.S. assets and would
reduce the value of assets owned by Americans overseas?
Answer. A stronger dollar increases U.S. dollar purchasing power.
To the extent the dollar gains strength relative to other currencies,
assets priced in those other currencies would become cheaper on a
dollar basis.
______
Questions Submitted by Hon. Michael F. Bennet
Question. Mr. Mnuchin, in commenting on tax reform, you recently
said, ``Any reductions we have in upper-income taxes will be offset by
less deductions so that there will be no absolute tax cut for the upper
class.'' In examining the second Trump tax plan released in the
campaign, the non-partisan Tax Policy Center found ``the highest-income
households would receive the largest cuts, both in dollars and as a
percentage of income.''
In fact, the top .1% of earners would receive an average tax cut of
almost $1.1 million. And the top 1% of earners would receive a tax cut
of $214,690. In contrast, a family in the bottom 20% would receive a
tax cut of $110.
Given this analysis, does the Trump tax plan meet your standard?
What types of changes would you make to this plan to ensure that upper
income taxpayers won't receive an absolute tax cut?
Answer. President Trump's objective is to ensure that tax reform,
when enacted, benefits hardworking Americans by putting more money in
their pockets and creating more jobs and opportunities. If confirmed, I
will work with Congress to achieve that objective and maintain an
appropriate level of progressivity.
Question. Earlier this week, Mr. Trump expressed his concern about
the House proposal to create a border adjustment as a way of curbing
corporate inversions. He said that the plan was ``too complicated.'' He
also said, ``Anytime I hear border adjustment, I don't love it because
usually it means we're going to get adjusted into a bad deal. That's
what happens.'' Later, however, he said, ``It's certainly something
that's going to be discussed.'' Ways and Means chairman Brady said that
the
President-elect's team was ``deeply engaged'' in talks with the House
about the tax.
Can you tell the committee the incoming administration's views on
the border adjustment plan?
Answer. The administration is still evaluating the impacts of the
House Republican Blueprint's border adjustment tax plan. As this plan
is further built out and additional details released, the
administration will be able to share additional views.
Question. Are you ``deeply engaged'' in crafting this proposal?
Answer. If confirmed, I will be leading the administration's
efforts on tax reform, working closely with other people within the
administration.
Question. Do you expect a border adjustment plan to be a
centerpiece of the incoming administration's tax proposal?
Answer. As part of the tax reform process, we will examine all
proposals put forward for their impact on keeping companies in the
United States, and on creating, retaining and returning jobs to our
shores. I intend to work closely with the committees of jurisdiction,
namely the Committee on Ways and Means and the Committee on Finance, as
well as the leadership in both chambers, to ensure that tax reform
benefits American companies and American workers first.
Question. Given the President-elect's focus on infrastructure, can
you provide more details on the incoming administration's plans? What
portion of the infrastructure plan will be direct funding versus
financing tools such as tax exempt bonds or an infrastructure bank?
Answer. The Trump administration will indeed be very focused on
enhancing America's infrastructure, and will consider various options.
Question. Both the Child and Earned Income Tax Credits have lifted
millions of families and children out of poverty. Families with the
youngest children, however, often receive smaller amounts through the
Child Tax Credit. I recently introduced a bill to make the child credit
more refundable and larger for families with young children. Would the
incoming administration consider these types of improvements to the
Child Tax Credit as part of tax reform?
Answer. Thank you for your work on this important issue. Improving
access to and the affordability of childcare is a priority for the new
administration. President Trump proposed several options in this area
during the campaign, and we look forward to working with you and the
rest of Congress to advance meaningful reforms.
______
Questions Submitted by Hon. Robert P. Casey, Jr.
Question. Mr. Mnuchin, China recently surpassed Canada to become
the United States' biggest trading partner in goods. Our trade deficit
with China in 2015 was $365.7 billion; $22.6 billion more than in 2014.
China is pushing to be reclassified as a market economy and has
overseen the wholesale theft of American intellectual property through
state-sponsored cyber-enabled economic espionage, including from
several Pennsylvania companies.
Please discuss your views on the issue, and describe what the
administration plans to do to protect American producers from these
unfair trade practices?
Answer. As Treasury Secretary, I will work with the President to
examine the U.S. trade relationship with China and assess the damage to
the American economy from China's practice of intervening in currency
markets to manipulate the yuan-dollar exchange rate, as well as other
unfair tactics that violate free trade principles. Furthermore,
intellectual property theft is one of the most serious international
trade violations. Ending IP theft will be a central focus of the
administration's trade policy.
Question. Mr. Mnuchin, will you take immediate action to address
global steel overcapacity? If so, please detail the steps you will
take.
Answer. I will work with the President to redress the economic
ramifications of global steel overcapacity and seek potential remedies.
Question. Mr. Mnuchin, will you take immediate action to address
Chinese dumping of aluminum? If so, please detail the steps you will
take.
Answer. As Treasury Secretary, I will pursue all actions within the
law to address Chinese dumping of aluminum. I will also work closely
with the Secretary of Commerce to ensure that the trade laws of the
United States are fully enforced.
Question. Mr. Mnuchin, when you acquired IndyMac, were you aware
that 86 percent of their suspicious activity reports--which help
identify, among other things, possible terrorist financing links--were
incomplete? And if not, when did you become aware?
Answer. I do not specifically recall the percentage of IndyMac SARs
that were incomplete at the time of OneWest's acquisition. However,
under my leadership, OneWest maintained a robust BSA /AML compliance
program overseen by an executive-level BSA Committee, and that
compliance program was periodically reviewed by both the OCC and the
Federal Reserve.
Question. Mr. Mnuchin, were you consulted by General Flynn prior to
his making 5 phone calls to the Russian embassy?
If not, do you think it is reasonable, as the Treasury Secretary
nominee, to expect to be consulted on such a matter? And, do you expect
the administration to similarly cut you out of future discussions
concerning sanctions? Who will be responsible for those decisions, if
not the Secretary of the Treasury?
Answer. No. If confirmed, I would expect to participate on the NSC
as previous Secretaries have.
Question. The Office of Foreign Assets Control or OFAC is
responsible for administering and enforcing economic and trade
sanctions--imposing controls on transactions and freezing assets under
U.S. jurisdiction. If a U.S.-based company set up a foreign subsidiary
to get around sanctions on a foreign government, would you consider
that a sanctions violation? What actions would you take in response?
Answer. To the extent that a U.S. company established a foreign
subsidiary that engaged in business with a sanctioned entity or
government, the determination of whether it violated U.S. economic
sanctions would depend on the particular sanctions program and relevant
prohibitions. In such a circumstance I would rely upon an assessment by
OFAC of the particular facts and circumstances as to whether sanctions
were being violated and the appropriate enforcement response.
Question. Since the President has refused to disclose his taxes, we
have no way of knowing where the President has business interests or to
whom he owes debts. Do you think it is appropriate for the President to
sign an affidavit affirming he has no financial interests in lifting
specific sanctions, prior to their being lifted?
Answer. I am confident that the President will put the interests of
the American people first, and will consult the White House general
counsel as appropriate.
Question. How would you evaluate any request from the President to
lift sanctions?
Answer. I would evaluate any request from the President based upon
the information available at that time.
Question. The President told the Wall Street Journal on Friday,
January 13th that he may lift sanctions on Russia. As the nominee for
the agency responsible for enforcing sanctions, were you part of the
decision-making process leading to his announcement?
If so, please describe what factors and equities you discussed.
Answer. As I have not yet been confirmed as Secretary of the
Treasury, I do not think it would be appropriate for him to consult
with me at this time.
Question. I am concerned about statements from Mr. Tillerson that
suggest the President's administration may take a dim view of the
utility of financial sanctions as a tool in our national security
toolkit. Will you commit to fully enforcing sanctions laws on the books
now and any future sanctions Congress may enact? Would you support the
expansion of sanctions against Russia for its support of the Assad
regime in Syria and its activities in Ukraine?
Answer. If confirmed, I will continue to support and enforce to the
fullest extent all existing economic sanctions programs as well as any
legislated by Congress in the future. To the extent that the President
and his national security advisors determine that it is in the best
interest of the United States to impose additional sanctions in a given
circumstance for a particular sanctions program, I will also provide
the President my advice and fully enforce such sanctions in support of
the President's national security strategy.
Question. Iran has been on the so-called FATF blacklist for its
support of terrorism and its failure to stop terrorist financiers
operating in its jurisdiction. Last year, FATF issued a decision to
suspend countermeasures against Iran for a period of 12 months while
keeping it on the blacklist. If confirmed, will you commit to working
with FATF to ensure that Iran is held accountable for its support for
terrorism and to assess whether the Iranian regime has taken sufficient
action to correct deficiencies and bring its financial sector into
compliance with international standards?
Answer. If confirmed, I commit to working with FATF to ensure that
Iran is held accountable for its support of terrorism and to assess
whether Iran has implemented sufficient steps to bring its financial
system in compliance with international standards.
Question. Hezbollah remains one of the world's deadliest and best-
funded terrorist organizations. They are responsible for many American
deaths and have advanced weaponry that could threaten our allies in the
Middle East, especially Israel. If confirmed, will you commit to
ensuring all sanctions on Hezbollah are enforced? Will you ensure that
entities and individuals that provide support to Hezbollah are subject
to Treasury sanctions?
Answer. If confirmed, I commit to ensuring all sanctions against
Hezbollah are enforced, and that any entities and individuals
determined to be supporting Hezbollah are subject to appropriate
sanctions.
Question. Considering Hezbollah's intensifying international
criminal activities, does the administration have any plans to
designate Hezbollah as a transnational criminal organization?
Answer. I will consult with the Secretary of State and the National
Security Council on whether or not to designate Hezbollah as a
transnational criminal organization pursuant to appropriate Treasury
authorities.
Question. If the President asked you to halt the Treasury
Department's participation in the investigation into communications
between members of the President's campaign team and Russia, would you
comply? As you were a member of the President's campaign team, will you
recuse yourself from the investigation?
Answer. If confirmed, I will seek the advice of the General Counsel
and Ethics Staff at the Department of the Treasury.
Question. Mr. Mnuchin, (1) when did you become aware that IndyMac
failed to provide the legally required loan counseling to reverse
mortgage recipients? And (2) what remedial action did you take to
correct this failure of the bank you took over to make sure consumers
weren't harmed?
Answer. Although I am aware that loan counseling was required for
reverse mortgage participants, I am not aware of the specifics as it
relates to the remedial action that was taken. I am confident that any
issues were properly addressed by the bank's compliance staff.
Question. Mr. Mnuchin, are you aware of HUD's Inspector General's
investigation of OneWest's reverse mortgage practices?
Will you cooperate with this investigation?
Answer. Yes, if needed.
Question. If confirmed as Secretary, will you recuse yourself of
any action that could hinder this investigation?
Answer. Yes.
Question. Have you spoken to Dr. Carson about this investigation?
Answer. No.
Question. To your knowledge, have any donors to the President
spoken to Dr. Carson about this investigation?
Answer. No.
Question. Mr. Mnuchin, one of the most significant scandals during
the financial crisis was the practice of ``robo-signing'' whereby bank
employees rapidly approved foreclosure documents without thorough
review. Many were wrongfully foreclosed upon on account of these
practices. Did OneWest ``robo-sign'' documents relating to foreclosures
and evictions?
Answer. OneWest Bank did not ``robo-sign'' documents, and as the
only bank to successfully complete the Independent Foreclosure Review
required by Federal banking regulators to investigate allegations of
``robo-signing,'' I am proud of our institution's extremely low error
rate.
Question. Mr. Mnuchin, did OneWest engage in the practice of ``dual
tracking''-- negotiating with a homeowner while pursuing foreclosure?
Answer. ``Dual tracking'' was a practice that historically occurred
in the mortgage industry as standard mortgage servicing policies
followed the requirements set by Fannie Mae and Freddie Mac. Shortly
after OneWest Bank's inception, the GSEs and other standard-setters
recognized that dual-tracking should be restricted, and OneWest
supported and followed these restrictions.
Question. Mr. Mnuchin, was it a common requirement of a reverse
mortgage agreement that an individual live in their home?
Did OneWest move to foreclose on individuals who they believed were
not living in their home?
If OneWest served an individual with reverse mortgage foreclosure
papers on account of OneWest's belief that the individual was not
residing in their home, but the papers were served to the individual at
their home, did that automatically end the foreclosure proceeding?
Answer. HUD regulations governing the Federal Home Equity
Conversion Mortgage (``HECM'') mortgages require that borrowers live in
the mortgaged property as their primary residence, and require
foreclosure when the borrower(s) have moved out of the property.
Consistent with these Federal regulations, OneWest's Financial Freedom
division did initiate foreclosures when it determined the borrowers no
longer lived in the property. I am not personally aware of information
relating to the last part of this question.
Question. Mr. Mnuchin, was it a policy at OneWest to use
foreclosure as a first option, rather than a last resort following
attempts at loan modifications for underwater borrowers?
Answer. No. Indeed, as one of the first servicers (and,
proportionate to the size of our mortgage business, one of the largest
servicers) to provide principal forgiveness, we were more successful
than most institutions at addressing the problem of underwater
borrowers. We addressed this not only through loan modifications, but
also through our support of the Federal HARP refinance program, under
which we originated more than $100 million of refinance mortgages to
``underwater'' borrowers with low or no equity in their homes.
Question. As I understand, backdating a foreclosure related
document would be employed so a company can move forward with a
foreclosure more quickly than the law would allow. Is backdating
foreclosure documents a violation of the law?
Answer. OneWest Bank did not engage in ``backdating.'' At the time
OneWest Bank opened its doors on March 19, 2009, it assumed control of
tens of thousands of foreclosures that had been initiated during the
FDIC's conservatorship of IndyMac Federal Bank. The FDIC provided
OneWest with powers of attorney to continue those pending foreclosure
actions, which allowed OneWest to step into those actions effective as
of the date they were initiated. Calling this ``backdating'' is
misleading, and disregards the fact that OneWest acted in these cases
at the direction of and with full knowledge of the FDIC.
Question. Did OneWest ever backdate foreclosure documents?
Answer. See previous response.
Question. Mr. Mnuchin, in addition to your providing the total
number of foreclosures executed by OneWest Bank, please provide the
following sub-data: the foreclosure rate on mortgages owned by OneWest;
the foreclosure rate on mortgages serviced by OneWest; the modification
rate of mortgages owned by OneWest; and the modification rate of
mortgages serviced by OneWest.
Answer. Because I am no longer employed by or affiliated with CIT
Group, I do not have access to this information. However, I note that
responsive information is available from publicly available sources,
including: https://www.treasury.gov/initiatives/financial-stability/
reports/Documents/June%20%202013%20MHA%20Repo
rt%20final.pdf.
Question. Mr. Mnuchin, please describe how much job growth
nationally you aim to achieve by 2020? Please also describe what kind
of job growth you aim to achieve in rural communities, counties like
Fayette, Wyoming, and Huntingdon in Pennsylvania?
Answer. We do not have any specific estimates at this point in
time. I can assure you that President Trump and I are committed to work
with you and others to see that no community is left behind.
Question. Mr. Mnuchin, please describe how much wage growth you aim
to achieve by 2020. Please also describe what kind of wage growth you
aim to achieve in rural communities, counties like Greene, Forest, and
Northumberland in Pennsylvania?
Answer. We do not have any specific estimates at this point in
time. I can assure you that President Trump and I are committed to work
with you and others to see that no community is left behind.
Question. Mr. Mnuchin, please describe the average GDP growth you
hope to see over the next 4 years?
Answer. We hope to see sustained economic growth in excess of 3
percent.
Question. Mr. Mnuchin, how will you ensure economic growth is
shared across all income levels?
What are your benchmarks for success?
Answer. One key component will be to keep the government out of the
business of picking winners and losers. Effective tax reform, reduced
regulation and eliminating the trade deficit will help us achieve this
objective.
Question. As Treasury Secretary, you will serve as managing trustee
of the Social Security and Medicare Trust Funds. Will you oppose
privatizing Social Security?
Answer. President Trump supports delivering on Social Security's
promise to current and future generations. If confirmed, I will work
with Congress to ensure that we maintain and improve upon the current
system.
Question. Will you oppose turning Medicare into a voucher or
premium support program?
Answer. I will work with the administration on this issue.
Question. As a public official you are barred from using public
office for your own private gain or for the primary gain of friends and
family. Do you agree with that prohibition?
Answer. Yes. I agree with that prohibition.
Question. As Treasury Secretary, you will be responsible for
approving or denying changes to the promised pension payments for
hardworking Americans and will sit on the board of the Pension Benefit
Guaranty Corporation. In that capacity, will you take into account
whether a company sold off valuable assets prior to engaging in the
MPRA process?
Answer. In engaging in the review process under the Multiemployer
Pension Reform Act, if confirmed, and in my role with respect to that
process, I will take into account all relevant information, and I would
seek advice as to whether that would include particular actions of a
company.
Question. Will you be retaining your millions in holdings in ESL
investments?
Answer. Pursuant to the review of my holdings by ethics officials,
I am permitted to retain my interest in ESL.
Question. To your knowledge, does the ESL fund you are invested in
own shares of Seritage Growth Properties?
Answer. I do not know whether ESL currently owns shares of Seritage
Growth Properties.
Question. Do you own shares in Seritage?
Answer. Accounts for the benefit of me and my children hold shares
in Seritage. In accordance with my ethics agreement, these shares will
be divested.
Question. As a member of the Sears board, you approved the sale of
some of the only remaining assets held by the company, including
property and iconic brands. Do you stand by that decision?
Answer. Yes. The Sears board approved the sale of certain assets
based upon its business judgment at the time of the decision. Sears
continues to operate over 1,400 stores and has approximately $10
billion of assets. The characterization of ``some of the only remaining
assets'' suggests that the assets sold were a large majority of the
total assets at the time of sale, which isn't accurate.
Question. Do you believe the sale of those assets, including the
sale of Sears commercial property to a REIT was in the best interest of
the over 200,000 hardworking Sears pension beneficiaries?
Answer. Sears has been in the middle of a significant
transformation designed to address the dramatic change that has
occurred in the purchasing behaviors of the American consumer. As a
company that has long been one of the largest employers in the United
States, it is distinguished from many of its retail competitors by both
its long history and its large pension plan. Many of Sears' competitors
either have no pension plans or relatively small plans, because these
companies did not exist until well after the end of World War II, after
which pensions became a more significant form of compensation for many
years, until they began to be replace by defined contribution plans.
In 2005, when Sears Holdings Corporation was formed as a result of
the merger of Sears and Kmart, the Sears and Kmart pension plans
collectively had well over 300,000 beneficiaries and the plans both
were underfunded. Sears Holdings inherited the pension plan of Sears in
the merger and the Kmart pension plan was assumed by shareholders upon
the emergence of Kmart from bankruptcy in 2003. Sears Holdings has met
all of its funding obligations required by law and currently has
approximately 185,000 beneficiaries in its pension plan.
Sears consulted and ultimately entered into a protection agreement
with the PBGC, which provided additional protection to the pension
plan.
Question. Do you agree that the lack of affordable child care is a
drain on the labor market?
Answer. President Trump made affordable child care a signature
issue in his campaign, and it remains a priority for the new
administration. The ability to afford child care is a concern for many
working families, and I look forward to working with the Congress on a
comprehensive plan to make easier the choice to remain in the labor
market or directly care for one's children.
Question. Can you explain why you believe a tax deduction of the
cost of child and dependent care is superior to a tax credit?
Answer. President Trump's commitment to helping Americans with
children find more affordable, quality child care will be a top
priority of the new administration. If confirmed, I will work with all
stakeholders to help make this goal a reality wherever it falls under
the aegis Treasury.
Question. Do you think the President should disclose how much he
stands to benefit from the repeal of the net investment income tax
prior to signing the repeal of the Affordable Care Act into law?
Answer. No. President Trump did not run for office to grow his own
wealth. He has repeatedly stated that he wants all Americans to reap
the financial benefits of a growing economy without the shackles of
excessive government regulation.
Question. How much do you personally stand to benefit from the
repeal of the net investment income tax?
Answer. The Net Investment Income Tax imposed by section 1411 of
the Internal Revenue Code applies at a rate of 3.8% to certain net
investment income of individuals, estates, and trusts that have income
above the statutory threshold amounts. I do not know how much income I
will have that could be subject to that tax in the future, and any
impact would be consistent with other changes to the tax code.
Question. The President has financial assets that are extremely
broad in scope and complexity. Do you agree with ethics experts that
the President should put his assets in a blind trust to avoid potential
conflicts of interests?
Answer. I have not been party to discussions with the relevant
experts and as such cannot have an opinion on the matter. However, I
know that the President has gone to great lengths to separate himself
from his business interests by putting his assets in a trust.
Question. Will you publicly disclose how you and your immediate
family, including your children, will personally benefit from changes
to the tax code and changes to tax regulations?
Answer. If confirmed, I will provide full disclosure of all
information required by applicable rules and regulations.
Question. Can you expand on what you meant when you said the
wealthy would not receive an absolute tax cut? What income level do you
define as wealthy? Will this be on earned income--as in wages--or all
income, including investment income?
Answer. I am committed to working with Congress to craft the best
possible tax reform plan to serve all Americans.
Question. Mr. Mnuchin, since your nomination as Treasury Secretary,
you have made several market-moving public statements. Will you provide
assurances that should you provide clarification to such statements,
you will do so publicly and in a manner that prevents individuals from
engaging in market manipulation?
Answer. If confirmed, I will fully adhere to all established
practices for statements made by the Secretary, including those that
involve public information that could affect values or markets.
Question. The Secretary of the Treasury has the significant
responsibility to ensure the U.S. Government pays its bills in full and
one time. I believe a man, and in this case, a government, is only as
good as its word. It is a word our government has never broken. Will
you vow you will continue to pay all our bills in full and on time, as
has every Treasury Secretary since our first--Alexander Hamilton?
Answer. If confirmed, I will strive to run an efficient and
effective department that will adhere to and abide by the
appropriations enacted by the Congress.
______
Questions Submitted by Hon. Mark R. Warner
fiscal concerns
Question. In an interview with CNBC, you said that the revenue loss
from cutting corporate taxes will be offset by revenues from stronger
economic growth and higher personal incomes.
Is it your view that tax reform will be revenue-neutral when the
dynamic effects on the economy are included?
Answer. Dynamic scoring is an important tool for analyzing the
impact of tax policy on jobs and economic growth. The use of dynamic
scoring is vital to designing pro-growth tax reform.
Question. Would you rely on the Joint Committee on Taxation's
dynamic scoring model?
Answer. The Joint Committee on Taxation's dynamic scoring model
shall be used for legislative purposes.
Question. Would it be revenue-neutral both in the 10-year budget
window and outside the budget window?
Answer. The exact results will be dependent on ongoing discussions
with the House and Senate on tax reform.
Question. You've talked about the positive economic effects of
cutting taxes. Do you believe there is a negative economic effect from
increasing debt?
Answer. The level and composition of Federal spending and taxation
are important considerations. Ultimately, it is about pursuing policies
that maximize shared economic growth.
congressional budget office and joint committee on taxation
Question. Currently, the Congressional Budget Office provides
independent and strictly nonpartisan analysis of the budget and
economic issues before Congress, and the Joint Committee on Taxation
provides nonpartisan revenue estimates of our tax legislation.
Given that members of Congress across the political spectrum--
Democrats and Republicans alike--have been frustrated with the results
of their analysis, I'm confident in their ability to provide
independent, nonpartisan estimates.
Will you commit to using CBO and JCT estimates to evaluate tax
plans?
Answer. The JCT estimates will be used for legislative purposes.
Question. Will you commit to allowing CBO and JCT to use their
independent assumptions about economic growth, without influence from
the administration?
Answer. Yes.
Question. And will you oppose any efforts by Congress to direct CBO
and JCT as to what assumptions they should or should not adopt in their
analysis?
Answer. I do not have a position on this matter.
new capitalism
Question. There are many ways that globalization and automation
have disrupted and displaced millions of American workers, especially
those with low and moderate job skills. I believe this has created the
economic anxiety we've seen reflected in our Nation's politics, on the
left and the right. I also have been shocked by recent trends among
many in corporate America to prioritize the short-term sugar high of
increased dividends and share buybacks over longer-term investments in
their people or communities or R&D.
Leaders in your own field like Warren Buffett and Larry Ellison at
Blackrock have drawn attention to this preoccupation with short-term
profits for temporary shareholders versus longer-term investment, and
the way it has undermined overall public confidence and trust in modern
America capitalism.
Do you agree that companies value short-term profits and
shareholders over longer-term investment?
Answer. Different companies value different approaches, but overall
I believe that more focus should be on long-term investment.
Question. Do you support modifications in the current incentive
structure to reward longer-term stock holds?
Answer. Preferences in the tax code already exist for holding
longer-term assets.
Question. Do you think we have a role to play in encouraging public
corporations, their CEOs and boards, to focus on a longer-term horizon?
Answer. The tax code already incentivizes this behavior, however we
should always look to additional ideas and policies.
Question. Do you support innovations in the tax code to do more to
help workers retrain and move up to new and better jobs?
Answer. Yes, if confirmed, I would welcome the opportunity to work
with you on ways to help workers retrain for better careers.
Question. Do you believe that we should be developing more
effective and portable unemployment and health insurance?
Answer. It is important that workers receive unemployment and
insurance benefits when they qualify. If confirmed, I would look
forward to the opportunity to work with you on these issues.
it modernization
Question. Our country's cyber-defenses are extremely vulnerable.
Currently, over 75% of our $88 billion Federal IT budget is spent
on operations and maintenance, while less than a quarter is spent on
development, modernization, and enhancement.
Instead of replacing legacy systems with modern, secure IT, we're
just patching outdated systems over and over again. Legacy systems can
be drags on productivity and innovation, and also pose cybersecurity
risks.
If you are confirmed, you'll be in charge of a department that is
responsible for vast quantities of extremely sensitive information.
How would you ensure that agencies in your department, such as the
IRS, are employing the best and most up-to-date IT?
Answer. If confirmed, I will use my technology expertise to work
with the Congress to ensure that all systems within Treasury are
sufficiently upgraded to protect the private data of U.S. taxpayers, as
well as other sensitive information that falls under the aegis of
Treasury.
supporting the mission of the irs/federal workers
Question. Our Federal civilian workforce plays a crucial role in
our economy, but unprecedented budget and staffing cuts at the Internal
Revenue Service make it difficult for employees to complete the
important audit and enforcement tasks that generate our Federal
revenue.
Even more, we know that there are enforcement programs at the
Internal Revenue Service that pay for themselves.
Do you agree that broad-based cuts in the IRS budget will hamper
our ability to collect revenue?
Answer. As Treasury Secretary, I will seek to adequately staff and
modernize the IRS. I do not have access to all the information, but it
is likely that further cuts to the IRS will indeed hamper our ability
to collect revenue.
Question. Will you agree to devote appropriate resources to the IRS
to allow it to fulfill its mission to serve America's taxpayers and
enforce our tax laws?
Answer. Yes, I believe in adequately staffing and modernizing the
IRS to fulfill its mission and enforce our tax laws.
infrastructure
Question. Infrastructure financing tools can work when there is a
dedicated revenue stream to repay a loan, like a toll road. However,
many experts suggest that financing is not going to fix everything and
there are much-needed infrastructure projects that simply may not have
a viable repayment stream.
Do you agree that we need to bring more real spending in order to
boost investment and stabilize the Highway Trust Fund?
Answer. Different types of infrastructure have different options
for payment or repayment, and many need to be evaluated on a case by
case basis. I look forward to working with you on the best course for
funding such projects.
Question. In her confirmation hearing last week, Transportation
Secretary Designate Elaine Chao committed to exploring every tool to
ensure long-term solvency of the Highway Trust Fund and did not rule
out raising revenues. Since 2008, Congress has authorized the transfer
of $143 billion from the General Fund to the Trust Fund. When the
current highway bill lapses in 2020, the Highway Trust Fund will again
be broke. CBO projects that 5 years after that, it will be facing a
cumulative deficit of more than $100 billion.
Will you commit to exploring ways to boost real funding--direct
government spending--on infrastructure and work in good faith to
identify potential revenue sources to bring long-term solvency to the
Highway Trust Fund?
Answer. A significant element of President Trump's campaign was a
promise to focus on new options for enhanced infrastructure spending,
including direct spending. As Treasury Secretary, I will help the
administration consider all options for increasing investments in
infrastructure and ensuring the long-term solvency of the Highway Trust
Fund.
data act
Question. Under the DATA Act of 2014, the Fiscal Service has
created a data format that connects all of agencies' spending
information--financial account balances, grant spending, contract
spending--into a single electronic picture. Currently the data format
focuses on money going out, not money coming in. This means that
although the picture will break spending down by appropriation, by
account, by program, etc., it will not break down non-appropriated
funds--fines, fees, and settlement collections, for instance.
Can Treasury expand the data format to also capture how agencies
receive funding, to provide a complete picture for citizens and
Congress?
Answer. If confirmed, I will be fully briefed on data formatting
and interagency compatibility, and will work with Congress and the
staff at Treasury to ensure that they are implemented.
Question. Under the DATA Act of 2014, every Federal agency will
begin reporting its spending information using a standardized,
government-wide data format, starting this May 9, 2017. At first, this
requirement will be duplicative. Agencies will keep reporting the same
information the old-fashioned way, using documents and legacy databases
like the GTAS and the FPDS, even while they begin reporting the
searchable, open data sets under the DATA Act.
Will Treasury phase out the legacy reporting requirements so that
agencies only report their spending once, and only as searchable data,
instead of as old-fashioned documents and inconsistent databases? Will
you support additional appropriations needed to replace and modernize
legacy systems?
Answer. Yes, I believe we need to update all our legacy systems.
Question. In partnership with the Office of Management and Budget,
the Department of Treasury leads governance efforts related to
implementation of the DATA Act. While OMB and Treasury have made
progress in developing high-level data governance concepts and
objectives, much work remains to be done to formulate policy and
procedures for developing new data standards, and adjudicating
conflicts between data standards.
Will Treasury commit to formalizing these additional procedures and
policies within the governance structure, such as in ways recommended
by the Government Accountability Office?
Answer. If confirmed, I will be fully briefed on recommendations by
these agencies, and will work with the staff at Treasury to ensure that
best practices and full compliance are achieved.
economic sanctions
Question. Nominee Tillerson, as CEO of ExxonMobil, said that
sanctions have to be well-implemented--comprehensively--to have any
effect. The Treasury Department has historically been very involved in
structuring our most effective sanctions regimes.
Do you see a role for Treasury? If so, what is that role? If not,
why not?
Answer. I agree that the Department of the Treasury plays a
critical role in implementing and enforcing economic sanctions to
ensure their effect. This role involves advising the President and his
other national security advisors on what authorities are available, how
these tools can be most effectively used, and then implementing them
through the Office of Foreign Assets Control. After sanctions regimes
are promulgated, strong enforcement efforts are necessary to ensure
that both domestic and foreign entities understand that the United
States will also make every effort to secure compliance with the
various sanctions prohibitions. If confirmed, I will consult with the
Secretary of State and the National Security Council and utilize all
sanctions tools delegated to me by the President--either through
Executive order or legislation--to vigilantly enforce sanctions to
ensure their effectiveness in achieving our national security strategy.
Question. President-elect Trump and cabinet nominees have said that
they will carefully review the JCPOA, including its ``side letters,''
to determine whether Iran is complying with the agreement.
Will you commit to not adjust or recommend that the President
adjust the waiver of any nuclear-related sanctions until the review is
complete and the administration has consulted Congress on its findings
and intentions?
Answer. The President has stated his intent to enforce the Joint
Comprehensive Plan of Action. I agree that all aspects and requirements
of the JCPOA need to be carefully reviewed and considered in order to
ensure that Iran is meeting all of its commitments under the agreement.
Question. Will you apply sanctions waived under the JCPOA on Iran
for non-
nuclear activities? If so, how will you notify Congress? How will you
notify other countries involved in the deal (the UK, France, Germany,
etc.)?
Answer. The President has stated his intent to enforce the Joint
Comprehensive Plan of Action. As Treasury Secretary, and in
consultation with the Secretary of State, I will act to fully enforce
all existing sanctions against Iran--including with respect to its
sponsorship of terrorism and other illicit activities.
Question. I believe that the U.S. sanctions worked to get Iran to
the negotiating table because other countries complied with our
secondary sanctions. That sanctions regime put enough pressure on the
Iranian economy that we had leverage to negotiate. Other nominees for
the cabinet have said that sanctions don't work, and have done business
through subsidiaries in Europe to circumvent U.S. sanctions.
If it becomes necessary to reapply international sanctions, how
would you work with other members of the cabinet to build an effective
sanctions regime? How will you work with international partners to
apply their own sanctions and /or to comply with ours?
Answer. The President has stated his intent to enforce the Joint
Comprehensive Plan of Action (``JCPOA''). As Treasury Secretary, and in
consultation with the Secretary of State, I will act to fully enforce
all existing sanctions against Iran--including with respect to its
sponsorship of terrorism and other illicit activities. To the extent
the President's national security advisors have information indicating
that Iran is not complying with the terms of the JCPOA, I will advise
the President on the options available to him for re-imposing waived
sanctions to promote strict compliance by Iran with the JCPOA. If such
re-imposition were necessary, I will support the President's decision
and coordinate with the Secretary of State to explain to our
international partners the justification for such re-imposition, and to
encourage them to support the United States' decision in that regard.
Question. President-elect Trump has indicated that he would be
willing to use sanctions relief as an incentive to get Russia to reduce
its nuclear stockpiles. Sanctions against Russia, including on its
energy sector, are having a measurable impact on Russia's economy. And
they were not levied because of Russia's nuclear stockpiles. They were
a result of Russia's illegal annexation of Crimea and its military
incursion into Ukraine. I would expect those sanctions to remain in
place until Russia removes itself from Crimea and Ukraine.
Will you commit to consulting Congress before you remove any
sanctions from Russia?
Answer. If confirmed, I will continue to support and enforce the
existing sanctions against Russia to the fullest extent, as I stated
during my confirmation hearing. To the extent that the President and
his national security advisors determine that it is in the best
interests of the United States to modify the sanctions or impose
others, I will fully enforce those sanctions in support of the
President's national security strategy.
Question. What additional sanctions will you consider applying to
Russia for its continued nefarious behavior?
Answer. If confirmed, I will regularly consult and collaborate with
the Secretary of State and the National Security Council, and to the
extent additional Russia-
related sanctions become necessary to execute the President's national
security strategy, I will advise the President and his other national
security advisors on what authorities are available and how these tools
can be most effectively used to counter the particular Russian
activities.
______
Resubmission of Questions for the Record From Democratic Members to
Steven Terner Mnuchin
Members found the responses to the initial questions for the record
to be far short of expected and appropriate level of responsiveness.
The document contained errors and in some cases answers to questions
not asked. Also, the document repeatedly made cursory and almost
meaningless answers. We would hope the nominee could provide
satisfactory answers prior to the markup.
Below are questions members would like the nominee to reconsider.
Questions Resubmitted by Hon. Debbie Stabenow
Question. Another difficult issue you will play a leadership role
in if you are confirmed as Treasury Secretary is pensions. This is an
incredibly important issue to my State, particularly because we have
about 47,000 workers and retirees who have been paying into the Central
States Pension Fund, which is in serious trouble.
What is your position on the Multiemployer Pension Reform Act,
which Treasury is responsible for administering?
How do you propose to shore up our multiemployer pension system?
Answer. You have my commitment to work with you to find solutions
to the multiemployer pension crisis.
Amended Answer. If confirmed, I will consult with you and other
interested parties on the Multiemployer Pension Reform Act of 2014.
Question. Our tax code clearly provides too many loopholes that
allow companies and wealthy individuals to avoid paying their fair
share through tax planning.
What do you think is the best strategy for preventing tax reform
from creating new loopholes that companies and individuals will abuse?
How would the incoming administration's tax plan close loopholes?
Answer. As part of our overall plan for tax reform, we will
consider this issue, and I look forward to consulting with Congress on
the matter if confirmed.
Amended Answer. The President has been clear that he will
aggressively pursue loophole closure to broaden the tax base. I will
make that policy direction a priority for the talented and experienced
tax professionals who staff the Treasury Department.
Question. I firmly believe that we cannot have a robust economy if
we do not grow things here and make things here.
How would the incoming administration's tax plan specifically help
the manufacturing and agriculture sectors?
Answer. I entirely agree with your belief that we must improve the
prospects of domestic manufacturing if we are to have a robust and
dynamically growing economy. I look forward to working with Congress to
examine and include tax provisions that will allow us to reach our
common objective of growing the economy.
Amended Answer. The President and the Senator generally agree on
creating or enhancing incentives for domestic manufacturing. If
confirmed, I will make this policy a priority for the talented and
experienced Treasury tax staff.
Question. How would you contrast that with how the House
Republicans' tax plan would affect the manufacturing and agriculture
sectors specifically?
Amended Answer. Since the administration's tax plan has yet to be
finalized, it is hard to contrast it with the House Republican plan,
but we will work with House Republicans to make sure any tax plan is
pro-growth and pro-jobs for manufacturing and agriculture. I would also
look forward to comparing it to the administration's tax plan when it
is available, and working with the congressional leadership to make
sure both are as pro-growth and pro-jobs as possible.
Question. From your perspective, how would eliminating the
deductibility of business interest expenses impact these sectors?
Amended Answer. Eliminating deductibility of interest could have an
impact on these sectors, and we will study it carefully as part of
overall tax reform.
______
Questions Resubmitted by Hon. Maria Cantwell
Question. At your hearing, you stated that you support the Volcker
rule and ``believe the concept of proprietary trading does not belong
in banks with FDIC insurance.'' The risks to our economy posed by
proprietary trading and banks making risky bets on behalf of customers
cannot be mitigated by merely separating proprietary trading from FDIC-
insured institutions. As we saw during the financial crisis, when non-
banking affiliates of FDIC insured banks failed, they were rescued by
their insured affiliates, which in turn were forced to be rescued by
taxpayers. This was the case with State Street Bank, and your former
employer, Goldman Sachs, which converted to a bank holding company in
order to be eligible for Federal bailout funds.
Do you believe that a legal distinction between two entities, one
insured and the other not, would keep the risky activities from one
from impacting another in a crisis? Would a bright-line between these
activities not better mitigate these risks?
Answer. I am supportive of the Volcker Rule to mitigate the impact
that proprietary risk-taking may have on a bank that benefits from
Federal deposit insurance. However, as I indicated, we need to provide
a proper definition of proprietary trading, such that we do not limit
liquidity in needed markets, as indicated by the recent Federal report.
Amended Answer. I do believe that a legal distinction between the
insured and non-insured entity is an important factor in eliminating
risky activities within the institution that has FDIC insured deposits.
I do not believe that the uninsured entity should be able to perform
proprietary trading.
The nominee did not answer the question, which referred to the
risks posed by proprietary trading at banks that are not federally
insured. Does the nominee think that proprietary trading by non-FDIC
insured institutions poses risks to the financial system? Does the
nominee believe that non-FDIC insured institutions, which may have FDIC
insured affiliates, should be able perform proprietary trading?
Question. What additional actions will you take as Treasury
Secretary to ensure market/financial stability? What other regulations
would help market stability? Do you believe that additional regulations
to ensure market stability and prevent financial crisis are in the
interest of ``public safety?''
Answer. I do not believe at this time that additional regulations
are needed to ensure market stability, however I expect that we will
review this issue at FSOC on an ongoing basis.
Amended Answer. If there are financial regulations that are needed
to protect ``public safety,'' I will advocate that these new
regulations are not part of the freeze.
The nominee did not answer the second part of the question.
President Trump has called for a freeze on all new regulations except
those to protect ``public safety.'' The committee deserves to know if
the nominee believes that regulations to protect our financial system
can be in the interests of ``public safety,'' and if not, why?
Question. Do you believe your former employer, Goldman Sachs, acted
responsibly and ethically when it bet against the same securities it
was selling to its customers?
Answer. As I mentioned in my testimony, I left Goldman Sachs nearly
fifteen years ago and prior to the financial crisis and the period of
time in question. I am not in a position to comment on these actions.
Amended Answer. For many years, administrations of both parties
have relied on appointees with considerable, relevant, private-sector
experience. My previous experience in the private sector will inform my
work as Treasury Secretary, and I would expect to assemble a highly
qualified team with a diverse set of experiences. If confirmed, I will
commit to use the Department's authorities in accordance with the law
and administration policies.
It is vital that the nominee comment on whether or not his former
employer acted ethically during the financial crisis. This will inform
the committee as to the enforcement and regulatory priorities the
nominee will focus on. With at least six former Goldman Sachs employees
set to take high level economic positions in the administration, the
nominee's views of their performance is critical.
Question. We have had a long tradition in this country that banking
activities should be separated from physical commerce. Recently, the
Federal Reserve issued a report required under section 620 of the Dodd-
Frank Act, recommending that Congress take action to prohibit banks
from engaging in merchant banking activities and owning certain
physical commodities. Would you support restoration of separation
between banking activities and commerce to support competition and
reduce risks?
Answer. If confirmed, I would further study section 620 to address
the issues of your concern.
Amended Answer. I support minimizing risks to our financial system,
especially in banks with FDIC insured deposits. If I am confirmed, I
look forward to working with Congress to achieve that objective. We
will examine the recommendations that fall within the Treasury
Department's jurisdiction and seek to advance them as appropriate, and
to work with Congress and other agencies to craft appropriate
legislative language where necessary.
The nominee did not answer the question. Section 620 of the Dodd-
Frank Act authorized a report from the Federal Reserve. The nominee was
asked to comment on the conclusions of the report, not the section of
the law the report was commissioned pursuant to.
Question. You have stated that there will be ``no absolute tax cut
for the upper class'' through tax reform. Will you support a tax cut
for the upper class outside of tax reform, such as the potential repeal
of the Affordable Car Act's additional Medicare Hospital Insurance tax
of 0.9% on earnings over $250,000 a year and the Medicare surtax of
3.8% on unearned income above $250,000 a year?
Answer. As you are probably aware, the President has proposed
eliminating the Medicare surtax. If confirmed, I will work with
Congress to reach an appropriate resolution to this issue.
Amended Answer. If confirmed, I look forward to reviewing possible
tax cuts with the talented professionals in Treasury's Office of Tax
Policy. I would also look forward to working with Congress to review
the administration's proposed distribution of tax cuts when it becomes
available.
The nominee did not answer the question.
Question. Do you believe that climate change is real and that human
activity is the primary driver of it?
Answer. I believe that climate change is a complex issue, but not
one primarily driven by the Treasury Department.
Amended Answer. I agree with Governor Perry's comment that ``the
climate is changing. I believe some of it is naturally occurring, but
some of it is also caused by man-made activity.''
The nominee did not answer the question.
Question. Did any of your marketing materials for your Anguilla or
Cayman Island funds express or advertise the tax benefits of their
offshore location?
Answer. The offering document for Dune Capital International
contained normal tax consideration disclosures as well as ERISA and
other regulatory considerations.
Question. Please provide to the Finance Committee any and all
marketing materials and letters.
Answer. As indicated in the preceding response, the confidential
offering memorandum describes the tax consequences of the investment
but does not express or advertise ``tax benefits'' from the investment.
The description of tax consequences in the confidential offering
documents is typical for such investments, including a description of
U.S. and Anguilla tax rules.
The nominee did not provide the requested documentation.
Amended Answer. I will provide a redacted copy of the confidential
offering memorandum as requested.
______
CONFIDENTIAL PRIVATE OFFERING MEMORANDUM
DUNE CAPITAL
INTERNATIONAL LTD.
(A Cayman Islands exempted company)
Ordinary Shares
April 2007
VII. TAX CONSIDERATIONS
CIRCULAR 230 NOTICE REQUIREMENT
The discussion contained in this document is not intended or written to
be used, and cannot be used, by any person for the purpose of avoiding
tax penalties that may be imposed on such person. The discussion is
written to support the promotion or marketing of investments in the
Fund. Any person considering an investment in the Fund should seek
advice based on the person's particular circumstances from an
independent tax advisor.
The following is a general discussion of certain of the anticipated
income tax considerations relevant to non-U.S. persons (as defined in
the next paragraph) and U.S. tax-exempt entities arising from the
purchase, ownership and disposition of Shares. Prospective investors
should consult their own tax advisors to determine the application and
effect of tax laws with respect to their own particular circumstances.
This discussion is based on laws and regulations currently in effect,
which may change or be subject to differing interpretations (possibly
on a retroactive basis).
For these purposes, the term ``non-U.S. person'' means any person
that is not a U.S. person for U.S. Federal income tax purposes. A U.S.
person means a citizen or resident of the United States, a partnership
or corporation created or organized in the United States or under the
laws of the United States or any State (other than a partnership that
is not treated as a U.S. person under any applicable Treasury
Regulations), an estate whose income is includable in gross income for
U.S. Federal income tax purposes regardless of its source or a trust if
a U.S. court is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons have the
authority to control all substantial decisions of the trust. In
addition, to the extent provided in Treasury Regulations, certain
trusts in existence on August 20, 1996 and treated as U.S. persons
prior to such date, which elect to continue to be treated as U.S.
persons, also will be U.S. persons for these purposes.
Special taxation rules may apply in the case of non-U.S. persons
(i) that conduct a trade or business in the United States or that have
an office or fixed place of business in the United States, (ii) that
have a ``tax home'' in the United States, (iii) that are former
citizens or long-term residents of the United States or (iv) that are
``controlled foreign corporations'' or ``passive foreign investment
companies'' for U.S. Federal income tax purposes, non-U.S. insurance
companies that hold Shares in connection with their U.S. business, or
corporations that accumulate earnings to avoid U.S. Federal income tax.
Such persons are urged to consult their own U.S. tax advisors before
investing in the Fund.
In view of the number of different jurisdictions where local laws
may apply to shareholders, the discussion below does not address the
local tax consequences to potential investors of the purchase,
ownership and disposition of Shares. Prospective investors are urged to
consult their own tax advisors in determining the possible tax,
exchange control or other consequences to them under the laws of the
jurisdictions of which they are citizens, residents or domiciliaries
and in which they conduct business.
United States
Income Taxation of the Fund and the Master Fund
Each of the Fund and the Master Fund will be treated as a
corporation for U.S. Federal income tax purposes. Because the Fund and
the Master Fund are organized under the laws of the Cayman Islands and
Anguilla respectively, they will be considered non-U.S. corporations
for purposes of the U.S. tax laws. As such, the U.S. Federal income tax
treatment of the Fund will vary depending upon whether the Fund derives
income or gains that are effectively connected with the conduct of a
trade or business in the U.S. Unless the context requires otherwise,
references to the term ``Fund'' in this discussion are deemed to
include the Master Fund.
Non-Effectively Connected Income. Gains derived by the Fund that
are not effectively connected with a U.S. trade or business will be
exempt from U.S. Federal income taxation. Dividends received by the
Fund from U.S. sources will be subject to U.S. withholding tax at a 30%
rate. U.S. source interest income received by the Fund generally will
be exempt from U.S. Federal income and withholding tax under the
exemption for ``portfolio interest'' or under another statutory
exemption. Interest on corporate obligations derived by the Fund will
qualify as ``portfolio interest'' if the Fund owns (directly and under
certain constructive ownership rules) less than 10% and of the total
combined voting power of the corporation paying the interest, and, with
respect to certain obligations issued after April 7, 1993, to the
extent the interest is not determined by reference to certain economic
attributes of the debtor (or a person related thereto). Interest
derived by the Fund on U.S. bank deposits, certificates of deposit and
certain obligations with maturities of 183 days or less (from original
issuance) also will be exempt from withholding tax. Interest (including
original issue discount) derived by the Fund from U.S. sources not
qualifying as ``portfolio interest'' and not otherwise exempt under
U.S. law will be subject to U.S. withholding tax at a 30% rate.
Effectively Connected Income. It is possible that the Fund may
engage in certain activities, such as loan origination, which, if
regularly carried on by the Fund during a taxable year, could cause the
Fund to be considered to be engaged in a trade or business in the
United States. Furthermore, the Fund may be required to foreclose on
debt securities secured by real estate or other U.S. trade or business
assets. The ownership of U.S. real estate or other U.S. trade or
business assets by the Fund would result in the Fund being engaged in a
U.S. trade or business. In those circumstances, the Fund's income from
such assets, which includes under ``FIRPTA'' gain from the disposition
of an interest in U.S. real property, would be treated as income that
is ``effectively connected'' with such U.S. trade or business and will
be subject to U.S. Federal corporate income taxation (currently imposed
at a maximum rate of 35%) on a net basis. In addition, it is possible
that the Fund could be subject to taxation on a net basis by State or
local jurisdictions within the United States. The Fund also would be
subject to a 30% U.S. Federal ``branch profits'' tax on certain of its
after-tax effectively connected earnings and profits not reinvested in
a U.S. trade or business during the year. Any such taxation could
adversely affect the Fund's ability to make payments in respect of the
Shares.
In circumstances where the Investment Manager deems it appropriate,
direct purchases of debt securities secured by real estate or other
business assets that are subject to foreclosures, and of certain other
investments, may be made by the Fund through one or more U.S. corporate
subsidiaries of the Fund (or other investment vehicle as appropriate).
Each such U.S. Subsidiary would be subject to U.S. Federal corporate
income tax on its net taxable income at regular Federal rates, and
dividend distributions from the U.S. Subsidiary to the Fund would be
subject to a 30 percent U.S. withholding tax, but cash distributions by
the U.S. Subsidiary upon its complete liquidation will not be subject
to taxation or to U.S. withholding tax.
The Investment Manager will attempt to structure the Fund's
investments in a manner to reduce the incidence of U.S. Federal (and
State and local) income tax on income and gains from such investments.
In light of the nature of the Fund's investment program, it nonetheless
should be anticipated that certain investments will generate income
subject to U.S. taxation on either a net or gross basis.
Taxation of Non-U.S. Shareholders
For U.S. Federal income tax purposes, a shareholder who is a non-
U.S. person will not be subject to U.S. Federal income taxation on
amounts paid by the Fund in respect of the Shares or gains recognized
on the sale, exchange or redemption of Shares, provided that such
income and gains are not considered to be effectively connected with
the conduct by the shareholder of a U.S. trade or business. In limited
circumstances, an individual shareholder who is present in the United
States for 183 days or more during a taxable year may be subject to
U.S. income tax at a flat rate of 30 percent on gains realized on a
disposition of Shares in such year. Individual shareholders who at the
time of their death are not citizens, former citizens or residents of
the United States should not be subject, by reason of the ownership of
Shares, to any U.S. Federal gift or estate taxes.
In the case of Shares held in the United States by a custodian or
nominee for a non-U.S. person, U.S. ``backup'' withholding taxes may
apply to distributions in respect of Shares held by such shareholder
unless such shareholder properly certifies as to its non-U.S. status or
otherwise establishes an exemption from ``backup'' withholding.
Taxation of U.S. Tax-exempt Entities
``Unrelated business taxable income'' (``UBTI'') is generally the
excess of gross income from any unrelated trade or business conducted
by a tax-exempt entity over the deductions attributable to such trade
or business, with certain modifications. UBTI generally does not
include interest, dividends, or gains from the sale of securities not
held as either inventory or primarily for sale to customers in the
ordinary course of business, except to the extent that any such item of
income is deemed to constitute ``unrelated debt-financed income''
within the meaning of section 514 of the U.S. Internal Revenue Code of
1986 (the ``Code'') and the Treasury Regulations promulgated
thereunder, and certain other requirements are met.
Income and gain that a U.S. tax-exempt entity derives from an
investment in Shares generally should not give rise to UBTI, except to
the extent that such entity acquires the Shares with acquisition
indebtedness.
The Fund will constitute a ``passive foreign investment company''
(a ``PFIC'') for U.S. Federal income tax purposes. Under Treasury
Regulations, a tax-exempt entity is not considered to be a shareholder
in a PFIC, except to the extent that a ``dividend'' paid by such PFIC
would be taxable as unrelated debt-financed income. Hence, a tax-exempt
entity would be subject to tax under the PFIC regime in respect of its
investment in Shares only in limited circumstances.
The application of the PFIC rules to certain types of tax-exempt
entities, such as charitable remainder trusts with beneficiaries who
are U.S. persons, is unclear. Accordingly, potential tax-exempt
investors are urged to consult their own tax advisors regarding the tax
consequences of an investment in the Fund.
Transfer Reporting Requirements
A U.S. person (including in certain circumstances a U.S. tax-exempt
entity) that transfers property (including cash) to the Fund in
exchange for Shares will be required to file a Form 926 or a similar
form with the Internal Revenue Service. In the event a U.S. shareholder
fails to file any required form, such holder could be subject to a
penalty of up to 10% of the value of the property transferred, subject
to a $100,000 limit so long as the failure was not due to intentional
disregard.
U.S. Investor Tax Filings and Record Retention
The U.S. Treasury Department has adopted regulations designed to
assist the Internal Revenue Service in identifying abusive tax shelter
transactions. In general, the regulations require U.S. taxpayers who
are investors in specified transactions (including certain shareholders
in foreign corporations and partners in partnerships that engage in
such transactions) to satisfy certain special tax filing and record
retention requirements. Current legislation imposes significant
monetary penalties (in addition to existing penalties that generally
may be applicable as a result of a failure to comply with applicable
Treasury regulations) for failure to comply with these tax filing and
record retention rules.
The regulations are broad in scope and it is conceivable that the
Fund may enter into transactions that will subject the Fund and certain
shareholders to the special tax filing and record retention rules. The
Investment Manager intends to provide information necessary to enable
shareholders to satisfy any tax filing and record retention
requirements that may arise as a result of any transactions entered
into by the Fund.
Cayman Islands
The Fund has been incorporated in the Cayman Islands as an exempted
company with limited liability and, as such, has received an
undertaking from the Governor-in-Cabinet of the Cayman Islands pursuant
to section 6 of the Tax Concessions Law (1999 Revision) to the effect
that, for a period of twenty years, no tax to be levied on profits,
income, gains or appreciations shall apply to the Fund or its
operations and no tax in the nature of estate duty or inheritance tax
shall be payable in respect of the Shares. Accordingly, it is not
envisaged that the Fund will be subject to any taxation in the Cayman
Islands other than incidental registry fees, annual registration fees
and stamp duties on certain instruments entered into by them.
There currently are no withholding taxes or exchange control
regulations in the Cayman Islands applicable to the Fund or its
shareholders.
There currently are no estate duty, gifts or gains taxes in the
Cayman Islands which would be applicable to the Shares or any income or
gains derived therefrom or transfers or redemptions effected in respect
thereof.
Anguilla
The Master Fund has been formed pursuant to the Anguilla Limited
Liability Companies Act (Revised Statutes of Anguilla 2000, Chapter L65
(the ``LLC Act'')).
There are no income taxes, corporation taxes, taxes on dividends or
distributions, inheritance taxes, estate duty, gifts or capital gains
taxes or withholding taxes of any kind in Anguilla.
There is also a blanket exemption from the imposition of future
taxes specifically provided for under sections 77 and 78 of the LLC
Act.
Under section 77 of the LLC Act, a limited liability company which
does not undertake business within Anguilla, other than so far as may
be necessary for the carrying on of the business of that limited
partnership exterior to Anguilla, shall not be subject to any income
tax, withholding tax or other taxes based upon or measured by assets or
income originating outside of Anguilla or in connection with other
activities outside of Anguilla.
Section 78 of the LLC Act provides a dividends and distributions
exemption from taxes. Section 78 expressly provides that any dividend
or distribution by a limited liability company which does no business
in Anguilla to a corporation, or to individuals or entities which are
not citizens or residents of Anguilla shall be exempt from tax or
withholding provisions of Anguillan law which might otherwise be
applicable to such limited liability company or the recipient of the
dividend or distribution.
Accordingly, it is not envisaged that the Master Fund will be
subject to any taxation in Anguilla other than incidental registry
fees, annual registration fees and the possibility of paying stamp duty
on certain instruments entered into by it.
______
Questions Resubmitted by Hon. Benjamin L. Cardin
Question. As we discussed in your confirmation hearing, when you
were nominated last November, you stated that ``[a]ny reductions we
have in upper-income taxes will be offset by less deductions so that
there will be no absolute tax cut for the upper class.''
As far as I can tell from available estimates by the Tax Policy
Center of President Trump's tax plan, the top 0.1 percent (in terms of
cash income percentile) would receive an average tax cut of over $1
million. Those in the top 1 percent would receive an average tax cut of
over $200,000. Tax Foundation modeling also shows that the top 1
percent would have an increased after-tax income, using static scoring,
of at least 10.2%.
What deductions would you repeal or amend to counteract this tax
cut to upper-income households?
Amended Answer. We will consider eliminating certain deductions
other than mortgage or charitable contributions.
Question. Could you please share the calculations your team has
undertaken to make sure that the tax cut for the upper class will be
fully offset by your changes?
If you disagree with the Tax Policy Center and Tax Foundation
estimates on the tax cuts upper-income householders receive, could you
please share the calculations your team has undertaken to show how
their taxable income would change?
If you don't have specific calculations, could you please explain
why you believe your plan does not contain an absolute tax cut for the
upper class?
Answer. President Trump's objective is to pass tax reform that
grows the economy and benefits all Americans. If confirmed, I will work
with President Trump and Congress to ensure that middle-class families
are not further burdened by higher taxes.
Our office would like a more responsive and detailed answer to this
series of questions. The multi-part questions are not answered. The
general answer at the end of the question is about middle-class
families. However, the question is about upper-class tax cuts, the
administration's views on the analyses of the Tax Policy Center and Tax
Foundation, and the reasoning behind Mr. Mnuchin's statement regarding
upper-class tax cuts. It is not about middle-class families.
Amended Answer. If confirmed, I look forward to reviewing possible
tax cuts with the talented professionals in Treasury's Office of Tax
Policy. I would also look forward to working with Congress to review
the administration's proposed distribution of tax cuts when it becomes
available.
Question. In your hearing, you discussed the importance of economic
growth in offsetting the revenues lost under the President's tax reform
plan. In previous statements, you've also implied that through this
economic growth, higher revenues from individuals would finance
business tax cuts. For instance, you've said, ``[s]o we think that by
cutting corporate taxes, we'll create huge economic growth and we'll
have huge personal income, so the revenues will be offset on the other
side.''
Is it your view that the tax cuts in the President's plan will be
fully offset by economic growth?
Answer. Our objective is to have any tax cuts offset by economic
growth.
Question. If so, could you please share your team's analysis
supporting that position?
Answer. Our objective is to have any tax cuts offset by economic
growth.
Amended Answer. If I am confirmed, I will be fully transparent in
providing information from the Treasury's Office of Tax Policy.
Question. Will you commit, as we discussed in our meeting, not to
put forward a plan that will increase the deficit and put our country
in a worse financial position?
Answer. Our objective is to have any tax cuts offset by economic
growth.
Our office would like responsive answers to the second and third
questions. An expansive reading of the third answer could characterize
that answer as responsive, but it would be helpful for the answer to
more explicitly answer the question if that is the intent, e.g., ``The
objective of our tax plan is to fully offset any revenue-losing changes
to the tax code by encouraging economic growth, thereby avoiding any
increase in the deficit.'' It would also be helpful to have clarity as
to whether the objective is that the tax cuts be fully offset by
economic growth, or only partially offset. We understand why Mr.
Mnuchin is, perhaps, uncomfortable saying ``will be offset,'' since
``will'' is pretty definite here on an issue that is subject to a lot
of variables. But having clarity on the objective at least is
important.
Amended Answer. Our objective is to have any tax cuts offset by
economic growth. If confirmed, I look forward to reviewing possible tax
cuts with the talented professionals in Treasury's Office of Tax
Policy. I would also look forward to working with Congress to review
the administration's proposed distribution of tax cuts when it becomes
available.
______
Questions Resubmitted by Hon. Robert Menendez
Question. Shortly after then President-elect Trump announced your
nomination, you told CNBC that you would focus on rolling back parts of
the Dodd-Frank Wall Street Reform Act. Specifically, you said, ``the
number-one problem with Dodd-Frank is that it's way too complicated and
cuts back lending.''
What specific provisions would you advise the President and
Republicans in Congress to change, repeal, or unwind?
Answer. I would advise the President and members of Congress on
rules that undermine economic growth and job creation. A particular
focus should be placed on reducing the regulatory costs faced by
community financial institutions, and making sure that small and medium
sized business have access to credit.
Amended Answer. I will, if confirmed, work with the administration
and interested members of Congress to analyze and identify regulatory
provisions that may have disproportionately adverse effects on
financial activities, including community financial institution
formation and lending. I will also listen to community experiences and
evidence provided by Americans on effects of provisions of financial
regulations--including those stemming from the Dodd-Frank Act--that
they identify as possible factors that inhibit community lending.
Continued monitoring of possible unintended consequences of existing
laws and regulations and of consequences in which costs to communities
outweigh benefits are an essential ingredient of the regulatory
process.
Question. During your confirmation hearing, you said, ``regulation
is killing community banks.'' According to data released by the FDIC on
November 29, 2016, community banks reported net income rose $593
million, or 11.8 percent from the 2015 period. The FDIC also reported
that community banks' net operating revenue totaled $23 billion, an
increase of 8.5 percent from a year earlier. Chair Gruenberg said,
``community banks, which account for 43% of the industry's small loans
to businesses, continued to grow their small business loans at a faster
pace than the rest of the industry.''
What specific regulations do you believe are particularly
detrimental to the community banking industry, and what changes would
you recommend?
Answer. I look forward to working with banking regulators and
Congress to determine what particular regulations could be reformed to
better serve customers and create a flow of credit while preserving key
capital adequacy and safety and soundness standards.
Amended Answer. Other studies, including from staff of the Federal
Reserve Bank of Richmond in 2015 and the Federal Reserve Board in 2014,
have identified a decline in the number of commercial banks and new
charters. If confirmed, I would evaluate the extent to which
regulations are contributing to these declines and look for ways to
reverse these trends.
Question. You have advocated changing the way the cost of tax
legislation is calculated or ``scored'' for the purposes of analyzing
its impact on the budget. But as you know, different so-called
``dynamic scoring'' models produce a wide range of results depending on
what assumptions are made. The Joint Committee on Taxation (JCT) is a
non-partisan, highly respected institution that provides members of
Congress and the general public with objective analysis regarding the
``cost'' of tax legislation.
Do you commit to respecting their independence and pledge to
refrain from exerting any pressure on JCT and their chosen model of
scoring?
Answer. The Joint Committee on Taxation has been an important
participant in and contributor to the tax reform process. I will work
with all congressional committees, including JTC, the Committee on Ways
and Means, the Committee on Finance, and the leadership of the House
and Senate, to develop tax legislation.
Amended Answer. If confirmed, I will respect the independence of
the Joint Committee on Taxation and refrain from exerting pressure on
them and their chosen model of scoring.
Question. Do you commit to accepting JCT's model as the final say
for scoring purposes?
Answer. I will work with all congressional committees, including
JTC, the Committee on Ways and Means, the Committee on Finance, and the
leadership of the House and Senate, to develop tax legislation.
Amended Answer. If confirmed, I will accept JCT's model as the
final say on scoring for legislative purposes. I would also commit to
working with JCT openly and transparently, consistent with the
longstanding relationship between the branches.
Question. Mr. Mnuchin, I'm disappointed that you wouldn't support
new sanctions on Russia for, among other things, interfering in our
election. Moreover, Mr. Trump said that he would potentially lift
sanctions against Russia quickly, unilaterally, and without input from
Congress. For those of us who have both authored much of the laws
putting the architecture for comprehensive and effective sanctions in
place, and those of us who believe that the legislative branch must be
an effective check on the Executive, this is alarming. Sanctions that
carry the full weight of law are a critical component of our national
security strategy.
Would you support efforts of the President to ignore the will of
Congress and unilaterally lift sanctions currently in place on Russian
individuals and actors?
Answer. If confirmed, I will continue to support and enforce the
existing sanctions against Russia to the fullest extent, as I stated
during my confirmation hearing. To the extent that the President and
his national security advisors determine that it is in the best
interest of the United States to modify the sanctions or impose others,
I will fully enforce those sanctions in support of the President's
national security strategy.
Amended Answer. If confirmed, I would advise the President to
consider all relevant and necessary information before taking action on
sanctions.
______
Questions Resubmitted by Hon. Thomas R. Carper
Question. President Trump has proposed several tax reform plans,
all of which would drastically cut taxes on wealthy individuals.
Studies of President Trump's revised tax reform plan found that the
largest benefits, both in dollar amounts and in percentage terms, would
accrue to the highest-income households. According to an analysis by
the Tax Policy Center, the Trump tax reform plan by itself would also
raise taxes on middle-class families with children, in large part
because it would repeal the personal exemption for children and force
single parents with children to file as singles and so forfeit the more
generous standard deduction they currently receive. The Trump proposal
does this while simultaneously delivering massive tax cuts to the
highest-income taxpayers and businesses. TPC's analysis also notes that
the incoming President's proposed child care deduction and tax credit
fails to compensate families for these other lost tax benefits.
At the same time, Mr. Mnuchin, you have stated that ``any
reductions we have in upper-income taxes will be offset by less
deductions so that there will be no absolute tax cut for the upper
class.'' Can you explain precisely what you mean--regarding both the
definition and your proposed policy framework--by ``absolute'' tax cut?
Answer. If confirmed, I look forward to working on measures that
lower the tax burden on the middle-class and working families.
Amended Answer. Our objective is to have any tax cuts offset by
economic growth. If confirmed, I look forward to reviewing possible tax
cuts with the talented professionals in Treasury's Office of Tax
Policy. I would also look forward to working with Congress to review
the administration's proposed distribution of tax cuts when it becomes
available.
Question. As noted above, you have repeatedly mentioned that a
middle-class tax cut is the centerpiece of your tax reform. Will these
middle-class tax cuts make up for the premium tax credits that will be
lost to ACA repeal?
Answer. If confirmed, I will work with the Secretary of Health and
Human Services to determine the economic impact of any changes to ACA.
Amended Answer. Our objective is to have any tax cuts offset by
economic growth. If confirmed, I look forward to reviewing possible tax
cuts with the talented professionals in Treasury's Office of Tax
Policy. I would also look forward to working with Congress to review
the administration's proposed distribution of tax cuts when it becomes
available.
Question. President Trump's plan indicated that itemized deductions
for high-
income individuals would be limited somehow. Could you please state
three specific tax deductions or tax breaks that you plan to eliminate,
which would help achieve the stated goal of avoiding ``absolute tax
cuts for the upper class''?
Answer. If confirmed I will work with the tax-writing committees,
Congress, and the staff at Treasury to advise the President on the best
course of action for the American taxpayer.
Amended Answer. Our objective is to have any tax cuts offset by
economic growth. If confirmed, I look forward to reviewing possible tax
cuts with the talented professionals in Treasury's Office of Tax
Policy. I would also look forward to working with Congress to review
the administration's proposed distribution of tax cuts when it becomes
available.
Question. Last year, President Trump offered a range of comments
regarding the national debt. After first suggesting that as President
he would ``renegotiate'' the national debt, he then later variously
suggested that Treasury bonds might be alternately ``discounted'' or
subject to a ``buy back'' or even ``refinanced'' with longer terms. As
Treasury Secretary, you may be the official who is tasked by President
Trump with somehow restructuring U.S. debt. Do you believe that
renegotiating or otherwise restructuring U.S. debt would be perceived
as a default?
Answer. I am confident that the President supports the full faith
and credit of the debt of the United States, as do I.
Amended Answer. If confirmed, I would work with the staff on a
variety of debt management issues. At the same time, I would not make
any recommendation to the President that would lead to default or that
could be perceived as leading to default.
Question. In September and October of last year, President Trump
stated, ``It's time to establish a national goal of reaching 4-percent
economic growth'' per year, and at other times suggested that ``I
actually think we can go higher than 4 percent. I think you can go to 5
percent or 6 percent.'' Can you briefly outline for us the
administration's detailed proposals that can be shown empirically to
achieve such high rates of growth?
Answer. We have abundant examples from American history about what
works and does not work. To achieve high rates of real, sustainable
economic growth, tax and regulatory reform must be pro-growth in design
and execution.
Amended Answer. Empirically, there is evidence that growth is
enhanced by many factors, including physical capital and technical
progress. I look forward to working with Congress to arrive at policies
that enhance growth by providing incentives for capital formation,
innovation and technical progress in America, and improvements in the
terms of trade.
I believe a change in policy, consisting of lower corporate and
personal income taxes, regulatory reform, and increased infrastructure
spending will help the U.S. surpass the current historically low rate
of GDP growth. The Obama recovery has delivered an annualized growth
rate of 2.1 percent. I believe higher growth can be achieved. Over the
comparable period of the Reagan recovery, for example, real GDP grew at
an annualized rate of roughly 4.5 percent.
Question. As noted above, the incoming administration has stated a
goal of achieving 3- to 4-percent economic growth per year. As you
know, population growth is a major component in GDP, and so slowing
population growth therefore presents a significant constraint on
achieving higher growth rates. One solution to this problem is
providing sufficient legal channels for immigrants to come or stay and
work in this country through immigration reform.
As you may know, the nonpartisan Congressional Budget Office
projected that the comprehensive immigration reform bill that passed
the Senate in 2013 would increase GDP by 3.3 percent in ten years, and
by 5.4 percent in twenty years. Yet, despite the economic growth
potential represented by an increase in immigration levels, some in the
incoming administration have demonstrated antipathy toward immigration
and immigrants from a broad range of nationalities and backgrounds.
Would you agree that boosting immigration levels could help achieve
a higher economic growth rate?
Answer. The President has repeatedly stated his support for legal
immigration.
Amended Answer. There are many inputs to the economic growth rate--
including levels of technology, population growth, government policy,
trade balances, and many others. Immigration is just one factor that
ultimately contributes to the level of economic growth.
Question. The incoming administration has promised to repeal the
Affordable Care Act, which provides a tax credit to small businesses
for providing health insurance to their workers. Do you agree that
eliminating this tax credit would increase taxes for small businesses
who are trying to do the right thing by helping their workers secure
health insurance?
Answer. The President has made affordable, accessible health care a
priority in his administration, and I look forward to working with
Congress and the President to achieve this goal.
Amended Answer. Our objective is to have any tax cuts offset by
economic growth. If confirmed, I look forward to reviewing possible tax
cuts with the talented professionals in Treasury's Office of Tax
Policy. I would also look forward to working with Congress to review
the administration's proposed distribution of tax cuts when it becomes
available.
Question. In an interview shortly after your selection as the
President's nominee for Treasury Secretary, you said that you looked
forward to working with House Financial Services Chairman Jeb
Hensarling on Dodd-Frank issues. Chairman Hensarling has been quoted as
saying that he believes Dodd-Frank has been a failure. Do you believe
that Dodd-Frank has failed to make the financial system safer?
Answer. If confirmed, I look forward to working with Chairman
Hensarling and other members of the House and Senate to develop
legislative solutions that improve U.S. financial system stability.
Amended Answer. The Dodd-Frank Act has changed regulation of many
aspects of the financial system, created a liquidation authority for
large financial companies, and changed some of the ways in which
regulators monitor financial system activities. Oversight and
activities in some financial activities likely improved following
enactment and subsequent implementation of Dodd-Frank, while some risks
and uncertainties may have increased as a result of enactment and
implementation. Ultimately, the overall ``systemic'' implications of
the Dodd-Frank Act would be best looked at using empirical assessments,
though such an exercise is challenging. I look forward to continuing to
monitor empirical assessments of the effect of Dodd-Frank on financial
activities, and I will work with Congress, market participants, and
regulators to ensure the safety and soundness of the financial system.
______
Question Resubmitted by Hon. Michael F. Bennet
Question. Both the Child and Earned Income Tax Credits have lifted
millions of families and children out of poverty. Families with the
youngest children, however, often receive smaller amounts through the
Child Tax Credit. I recently introduced a bill to make the child credit
more refundable and larger for families with young children. Would the
incoming administration consider these types of improvements to the
Child Tax Credit as part of tax reform?
Answer. Thank you for your work on this important issue. Improving
access to and the affordability of childcare is a priority for the new
administration. President Trump proposed several options in this area
during the campaign, and we look forward to working with you and the
rest of Congress to advance meaningful reforms.
Amended Answer. First, I believe that we need to consider these
issues in the context of overall tax reform. If confirmed, I am
committed to working with you to find the best way possible to
restructure the existing Child Tax Credit, including looking at the
size of the credit and the extent to which the credit is refundable.
You raised the issue of the age of a family's children. I think we need
to look at how the Child Tax Credit can be structured to help families
with younger children, particularly in relation to the President's
desire to help families pay for child-care costs.
______
Questions Resubmitted by Hon. Mark R. Warner
new capitalism
Question. There are many ways that globalization and automation
have disrupted and displaced millions of American workers, especially
those with low and moderate job skills. I believe this has created the
economic anxiety we've seen reflected in our nation's politics, on the
left and the right. I also have been shocked by recent trends among
many in corporate America to prioritize the short- term sugar high of
increased dividends and share buybacks over longer-term investments in
their people or communities or R&D.
Leaders in your own field like Warren Buffett and Larry Ellison at
Blackrock have drawn attention to this preoccupation with short-term
profits for temporary shareholders versus longer-term investment, and
the way it has undermined overall public confidence and trust in modern
America capitalism.
Do you agree that companies value short-term profits and
shareholders over longer-term investment?
Answer. Different companies value different approaches, but overall
I believe that more focus should be on long-term investment.
Question. Do you support modifications in the current incentive
structure to reward longer-term stock holds?
Answer. Preferences in the tax code already exist for holding
longer-term assets.
Amended Answer. I support the current tax system that rewards long-
term capital gains.
Question. Do you think we have a role to play in encouraging public
corporations, their CEOs and boards, to focus on a longer-term horizon?
Answer. The tax code already incentivizes this behavior, however we
should always look to additional ideas and policies.
Amended Answer. If confirmed, I would support policies that would
encourage public corporations' CEOs and boards to focus on long-term
profits and growth. However, I believe these decisions belong with the
boards of directors.
Question. Do you support innovations in the tax code to do more to
help workers retrain and move up to new and better jobs?
Answer. Yes, if confirmed, I would welcome the opportunity to work
with you on ways to help workers retrain for better careers.
Amended Answer. Yes, I support innovations in the tax code that
would help workers retrain and move up to new and better jobs.
Question. Do you believe that we should be developing more
effective and portable unemployment and health insurance?
Answer. It is important that workers receive unemployment and
insurance benefits when they qualify. If confirmed, I would look
forward to the opportunity to work with you on these issues.
Senator Warner would like to know what tax incentives and
preferences already exist in the tax code to promote long-term
investment and encourage companies to focus on a longer-term horizon.
Amended Answer. Yes, I believe that we should look at solutions
that will be more effective for portable unemployment and health
insurance.
______
Questions Resubmitted by Hon. Robert P. Casey, Jr.
Question. Mr. Mnuchin, in addition to your providing the total
number of foreclosures executed by OneWest bank, please provide the
following sub-data:
a. The foreclosure rate on mortgages owned by OneWest;
b. The foreclosure rate on mortgages serviced by OneWest;
c. The modification rate of mortgages owned by OneWest; and
d. The modification rate of mortgages serviced by OneWest.
Answer. Because I am no longer employed by or affiliated with CIT
Group, I do not have access to this information. However, I note that
responsive information is available from publicly available sources.
You did not provide a response to the question. Further, you
provided assurances when we met that you would provide national
foreclosure data and assurances to my staff you would provide a copy of
the letter referenced in your testimony to the Committee. Please do so.
Amended Answer. I have requested the additional information as well
as the referenced letter.
Question. The President told The Wall Street Journal on Friday,
January 13th that he may lift sanctions on Russia. As the nominee for
the agency responsible for enforcing sanctions, were you part of the
decision-making process leading to his announcement?
If so, please describe what factors and equities you discussed.
Answer. As I have not yet been confirmed as Secretary of the
Treasury, I do not think it would be appropriate for him to consult
with me at this time.
You did not provide a response to the question.
Amended Answer. No, I was not part of the decision-making process,
as I have not yet been confirmed as Secretary of the Treasury.
Question. Mr. Mnuchin, one of the most significant scandals during
the financial crisis was the practice of ``robo-signing'' whereby bank
employees rapidly approved foreclosure documents without thorough
review. Many were wrongfully foreclosed upon on account of these
practices. Did OneWest ``robo-sign'' documents relating to foreclosures
and evictions?
Answer. OneWest Bank did not ``robo-sign'' documents, and as the
only bank to successfully complete the Independent Foreclosure Review
required by Federal banking regulators to investigate allegations of
``robo-signing,'' I am proud of our institution's extremely low error
rate.
You stated in your response that ``OneWest did not robo-sign''
documents. However, a 2011 Reuters investigation found that at least
five servicers in recent months ``have filed foreclosure documents of
questionable validity: OneWest Bank, Bank of America, HSBC Bank USA,
Wells Fargo, and GMAC Mortgage.'' Regulatory reviews found critical
weaknesses in governance, documentation, and oversight that ``resulted
in unsafe and unsound practices and violations of applicable federal
and state law and requirements.''
Additionally, you stated you were proud of your ``institution's
extremely low error rate.'' However, that error rate is relative to the
other banks under review for engaging in ``unfair and unsound
practices.'' There were 6,500 banks that did not have to go through any
review at all. OneWest had a 6% error rate for mortgages to members of
the military protected by the Service Member Civil Relief Act. These
and other errors affected more than 5.6 percent of all borrowers,
10,700 homeowners. Do you believe an error rate of 6% is an appropriate
level when someone's home is in the balance? Please amend your response
to reflect answers to the original and these additional questions.
Amended Answer. The concept of ``robo-signing'' generally referred
to two distinct but related issues: (a) a signer of a foreclosure
affidavit attested to facts that were not verified to be accurate; or
(b) a signer of a foreclosure affidavit represented himself or herself
to be someone else (for example, if the signer was employed by a
company that did not have standing to foreclose but represented himself
or herself as someone with standing to foreclose). Page 14 of the OCC's
April 2014 report on the Independent Foreclosure Review (``IFR'')
demonstrates that OneWest did not do these things.
On the review category ``services did not have standing to
foreclose,'' OneWest's error rate was 0 percent.
On the review category that investigated the possibility that
foreclosure occurred without proper facts supporting the foreclosure
(``Borrower not in default''), OneWest's error rate was .001 percent.
In fact, for 12 of the 14 categories independently reviewed as part
of the IFR, OneWest's error rate was less than 0.5 percent.
It is true that small numbers of borrowers were found to have been
affected by errors, including in the categories you mentioned, and
OneWest fully remediated those borrowers in the manner prescribed by
Federal regulators.
Question. Mr. Mnuchin, did OneWest engage in the practice of ``dual
tracking''-- negotiating with a homeowner while pursuing foreclosure?
Answer. ``Dual tracking'' was a practice that historically occurred
in the mortgage industry as standard mortgage servicing policies
followed the requirements set by Fannie Mae and Freddie Mac. Shortly
after OneWest Bank's inception, the GSEs and other standard-setters
recognized that dual-tracking should be restricted, and OneWest
supported and followed these restrictions.
You provided a response, but not a response to the question.
Further, in your response you stated OneWest ``supported and followed''
restrictions on dual tracking. However, in September 2013, ``a San Luis
Obispo County couple won a seven-figure settlement and title to their
two houses from OneWest when a judge determined the bank had engaged in
dual tracking.'' Would you like to amend your response?
Amended Answer. To be more specific, at one point dual tracking was
a common and accepted procedure based on investor requirements and loan
modification program terms and conditions. As such during this period
OneWest conformed with that standard and did dual-tracking as a matter
of practice. At a later date, State laws and Federal regulatory
guidance came out which eliminated dual tracking and the industry, and
OneWest, changed its policy. I do not recall the specific circumstances
of the settlement that you mention and whether it dealt with dual-
tracking or not.
Question. If OneWest served an individual with reverse mortgage
foreclosure papers on account of OneWest's belief that the individual
was not residing in their home, but the papers were served to the
individual at their home, did that automatically end the foreclosure
proceeding?
Answer. HUD regulations governing the Federal Home Equity
Conversion Mortgage (``HECM'') mortgages require that borrowers live in
the mortgaged property as their primary residence, and require
foreclosure when the borrower(s) have moved out of the property.
Consistent with these Federal regulations, OneWest's Financial Freedom
division did initiate foreclosures when it determined the borrowers no
longer lived in the property. I am not personally aware of information
relating to part (b) of this question.
Your response that you are not aware of information relating to the
question implies you were not aware of the foreclosure practices at the
bank you ran, despite holding weekly meetings concerning disputed
foreclosures, as you discussed in the hearing. If you were unaware of
the foreclosure practices at your bank, how can you reassure the
committee that you will show greater care to such issues as Treasury
Secretary?
Amended Answer. Thank you for the opportunity to clarify my
response. I read the original question as being posed in the
hypothetical. I do not recall this circumstance ever arising. In
addition, the weekly meeting referenced in my testimony focused on
matters that had arisen, but that could not be resolved through
OneWest's normal resolution process. I also do not recall the
circumstance described in this question as arising in any of those
weekly meetings.
Question. Mr. Mnuchin, please describe how much job growth
nationally you aim to achieve by 2020? Please also describe what kind
of job growth you aim to achieve in rural communities, counties like
Fayette, Wyoming, and Huntingdon in Pennsylvania?
Answer. We do not have any specific estimates at this point in
time. I can assure you that President Trump and I are committed to work
with you and others to see that no community is left behind.
You did not respond to the question. As the President repeatedly
stated a goal of 25 million jobs created in the next 10 years, it
belies reason that his administration would not have benchmarked goals
for achieving such growth in the next 4 years.
Amended Answer. The President views this initiative over a 10-year
period, and thus the benchmarks on which I would be focused would be
for that period. If confirmed, I look forward to working with Congress
on these issues and advising the President accordingly if Congress
believes additional benchmarks are necessary.
Question. Will you oppose turning Medicare into a voucher or
premium support program?
Answer. I will work with the administration on this issue.
You did not respond to the question.
Amended Answer. Medicare has served millions of Americans over many
years. Our goal when it comes to Medicare has to be to ensure that the
program is fiscally viable and serves the American people for
generations to come. If confirmed, I would look for ways to reduce the
cost of Medicare while simultaneously improving the way it serves our
nation's seniors.
Question. Can you explain why you believe a tax deduction of the
cost of child and dependent care is superior to a tax credit?
Answer. President Trump's commitment to helping Americans with
children find more affordable, quality child care will be a top
priority of the new administration. If confirmed, I will work with all
stakeholders to help make this goal a reality wherever it falls under
the aegis of Treasury.
You did not respond to the question. During his campaign, the
President proposed a deduction for the cost of child and dependent
care. The question asks you to explain why you believe a tax deduction
(which the President proposed) is superior to a tax credit.
Amended Answer. The President wants to help families deal with the
cost of child and dependent care. Part of the proposal was to allow a
deduction for child care expenses. If confirmed, I would look forward
to working with Congress on ways to achieve this goal.
Question. Can you expand on what you meant when you said the
wealthy would not receive an absolute tax cut? What income level do you
define as wealthy? Will this be on earned income--as in wages--or all
income, including investment income?
Answer. I am committed to working with Congress to craft the best
possible tax reform plan to serve all Americans.
You did not respond to the question.
Amended Answer. Our objective is to have any tax cuts offset by
economic growth. If confirmed, I look forward to reviewing possible tax
cuts with the talented professionals in Treasury's Office of Tax
Policy. I would also look forward to working with Congress to review
the administration's proposed distribution of tax cuts when it becomes
available.
Question. As a member of the Sears board, you approved the sale of
some of the only remaining assets held by the company, including
property and iconic brands. Do you stand by that decision?
Answer. Yes. The Sears board approved the sale of certain assets
based upon its business judgment at the time of the decision. Sears
continues to operate over 1,400 stores and has approximately $10
billion of assets. The characterization of ``some of the only remaining
assets'' suggests that the assets sold were a large majority of the
total assets at the time of sale, which isn't accurate.
Please clarify your response to your question. Your assertion that
Sears's remaining real estate assets are worth $10 billion is doubtful.
This assumes the REIT sale of Sears Holdings' real estate accounted for
around 20% of Sears's owned locations. However, in actuality, the REIT
and joint ventures account for approximately 40% of Sears's owned
locations.
If instead you were referring to Sears's total assets, that sum is
inclusive of merchandise inventories, which by its nature is an asset
to be sold.
Amended Answer. Yes, I stand by the board's decision.
Question. Do you believe the sale of those assets, including the
sale of Sears commercial property to a REIT, was in the best interest
of the over 200,000 hardworking Sears pension beneficiaries?
Answer. Sears has been in the middle of a significant
transformation designed to address the dramatic change that has
occurred in the purchasing behaviors of the American consumer. As a
company that has long been one of the largest employers in the United
States, it is distinguished from many of its retail competitors by both
its long history and its large pension plan. Many of Sears' competitors
either have no pension plans or relatively small plans, because these
companies did not exist until well after the end of World War II, after
which pensions became a more significant form of compensation for many
years, until they began to be replaced by defined contribution plans.
In 2005, when Sears Holdings Corporation was formed as a result of
the merger of Sears and Kmart, the Sears and Kmart pension plans
collectively had well over 300,000 beneficiaries, and the plans both
were underfunded. Sears Holdings inherited the pension plan of Sears in
the merger and the Kmart pension plan was assumed by shareholders upon
the emergence of Kmart from bankruptcy in 2003. Sears Holdings has met
all of its funding obligations required by law and currently has
approximately 185,000 beneficiaries in its pension plan.
Sears consulted and ultimately entered into a protection agreement
with the PBGC, which provided additional protection to the pension
plan.
You provided a response, but not a response to the question that I
asked.
Amended Answer. Yes, I believe that the sale was in the best
interest of the Sears' pension beneficiaries and other stakeholders.
Question. The Secretary of the Treasury has the significant
responsibility to ensure the U.S. Government pays its bills in full and
on time. I believe a man, and in this case, a government, is only as
good as its word. It is a word our government has never broken. Will
you vow you will continue to pay all our bills in full and on time, as
has every Treasury Secretary since our first--Alexander Hamilton?
Answer. If confirmed, I will strive to run an efficient and
effective department that will adhere to and abide by the
appropriations enacted by the Congress.
You provided a response, but not a response to the question that I
asked.
Amended Answer. Yes, I will vow to continue to pay all our bills in
full and on time.
______
Questions Resubmitted by Sherrod Brown
Responses to questions for the record were sloppy, evasive, and
inadequate.
Question. Mr. Mnuchin, in addition to Senator Heller's request for
foreclosure data in Nevada, would you please provide a State-by-State
breakdown of the foreclosures initiated by OneWest? Would you also
provide a breakdown of the number of permanent HAMP modifications as
well as the number of permanent propriety modifications that OneWest
completed while you were chairman?
Answer. Because I am no longer employed by or affiliated with CIT
Group, I do not have access to this information.
Amended Answer. Senator Heller's request should be included in the
record. I received the answer to Senator Heller's request, which is
included. I will put in the request for a State-by-State breakdown for
you.
Question. Mr. Mnuchin, I understand that OneWest sent a letter to
the OCC explaining the problems in the HECM book of Financial Freedom
when you were seeking approval for a merger with CIT, but you
referenced a 2015 letter that you sent to HUD. Would you provide the
committee a copy of the letter referenced in your testimony?
Answer. Because I am no longer employed by or affiliated with CIT
Group, I do not have access to this information.
Amended Answer. I have requested a copy of the letter from CIT.
Question. Mr. Mnuchin, President Trump's nominee for HUD Secretary,
Dr. Ben Carson, raised questions about the continuation of the 30-year,
fixed-rate mortgage in his confirmation hearing.
Do you believe the widely available 30-year fixed-rate mortgage is
an important aspect of our housing market?
Amended Answer. Yes, I believe this is one of many important
aspects for our housing market.
Question. What would happen to home equity and home values if
access to the 30-year fixed rate decreased or if the product became
more expensive?
Amended Answer. Home values have appreciated significantly in many
areas of the country. Any limitation of 30-year fixed rate financing or
fixed costs may have impacts on certain markets.
Question. You mentioned that you want to seek a housing finance
market solution that doesn't put taxpayers at risk or eliminate capital
for the housing market. Given that retained capital at the GSEs will be
zero a year from now, can you provide more information about a solution
that protects taxpayers, maintains capital, and expands access and
affordability for borrowers who can sustain homeownership?
Amended Answer. Any solution will be dependent upon the GSEs being
capitalized properly and other such controls that eliminate risk to
taxpayers.
Question. In 2014 and 2015, many of your business dealings
converged. In October 2014, you joined the board of directors of
Relativity Media as non-executive co-
chairman. Around the same time, Dune Capital Investment (Dune Capital
Partners IV), a fund you managed, invested in Relativity, and your
bank, OneWest, loaned hundreds of millions of dollars to Relativity
Media. Please answer the following questions.
At the time you joined Relativity's board, how much had OneWest
loaned or invested in Relativity, and how much more did it lend or
invest between October 2014 and May 2015 when you left the board?
Answer. OneWest did not make any equity investments in Relativity.
In response to the committee staff questions dated January 4, 2017, I
requested information from OneWest/CIT regarding the banks extensions
of credit exceeding the Regulation O disclosure requirements. The
information I received was provided to the committee staff on January
12, 2017. In response to the committee staff questions dated January
13, 2017, I requested additional identification of each loan. The
information I received from OneWest/CIT was provided to the committee
on January 18, 2017.
Amended Answer. As disclosed in the information provided to the
committee staff, the bank did not extend additional credit.
Question. OneWest/CIT has had several allegations leveled against
it for violating rules or laws administered by HUD or FHA. What
processes or protections have you, or will you, and Dr. Carson put in
place to ensure that HUD, FHA, and its Inspector General have a fair
process for evaluating your former institution's dealings with HUD and
FHA, and that HUD, FHA, and the Department of Justice are impartial and
not influenced in an improper manner?
Answer. Because I am no longer employed by or affiliated with CIT
Group, I do not have access to this information.
Amended Answer. As reflected in my ethics agreement, I will not
participate personally and substantially in any particular matter
involving specific parties in which I know CIT Group is a party unless
authorized to participate by ethics officials. Upon confirmation, I
will implement procedures that will screen matters coming before me to
facilitate compliance with my recusal obligations.
Question. In the confirmation hearing, you claimed that Relativity
Media did not receive Chinese investment. Yet news reports, such as an
article in The Los Angeles Times (``Relativity Media expands in China
with the new deal, partners,'' June 16, 2014), identified two ``new
Chinese partners'' in Relativity Media as Jiangsu Broadcasting Corp.
and Seedshine Capital. The article quoted your friend and Relativity
Media chief executive Ryan Kavanaugh about the Chinese partnership:
``The partnerships will deepen our relationship with the Chinese media
and entertainment industry and provide a world-class platform from
which to co-develop Chinese and international film and television
content from two leading organizations.'' Having considered this
information, please explain the nature of the business relationship
between Relativity, Jiangsu, and Seedshine. Would you still testify
before the Finance Committee that Relativity Media had no Chinese
investors?
Answer. To the best of my knowledge, these entities were not
investors in Relativity Media Holdings, which was the question I was
answering.
Amended Answer. Although it was reported in the press that
Relativity Media ``signed a strategic advisory agreement with
Industrial and Commercial Bank of China Limited via which investment
firm SeedShine Capital has entered a binding agreement to invest''
(Yahoo News, June 16, 2014), to my knowledge, this investment never
closed and they were not investors in Relativity Media.
Question. As I mentioned in the confirmation hearing, I am
concerned that the U.S. Government has not been tough enough on China,
and American workers, particularly in the steel and aluminum
industries, have paid the price. What specific tools and authority at
Treasury will you use to address this unbalanced trade relationship and
increase China's compliance with its international trade obligations?
How do you see Treasury policies and actions benefitting laid-off
steelworkers in Lorain, OH?
Answer. (Judy Shelton) Treasury has congressional authority to
examine the
exchange-rate practices of major trading partners to identify nations
that engage in currency manipulation. I will work with the Secretary of
Commerce to help ensure that the unfair trade laws of the United States
are enforced. I will also work with Congress to ensure our trade laws
adequately address harm to our industries and workers from unfair trade
practices.
It is difficult to understand the intent of including Judy
Shelton's name in the text. Even if we assume that this is simply an
oversight on the part of Mr. Mnuchin and his staff, it speaks to the
general quality of the work done in preparing these responses.
Amended Answer. Including the name in the text was an oversight,
and I sincerely apologize.
Question. Please list three ways we can expand the Earned Income
Tax Credit and the Child Tax Credit to promote work.
Answer. I look forward to working with your staff on this issue.
The Earned Income Tax Credit and the Child Tax Credit are the
country's largest antipoverty program outside of Social Security. The
credits support tens of millions of working families and are the tax
code's most effective work incentive. They are bipartisan and have been
supported by the last seven Presidents. Mr. Mnuchin owes the committee
more than to profess to have no knowledge of these provisions.
Amended Answer. I share the President's commitment to make child
care more affordable for working parents. The President is also
committed to help stay-at-home moms and dads. While this needs to be
considered in the context of broader tax reform, there are a number of
options Congress and the administration could consider to promote work.
There are many ways of doing this and we will work with you on
reviewing our options. In addition, I recognize that tax reform may
involve consideration of changes to the Earned Income Tax Credit and
Child Tax Credit, and I look forward to working with Members of
Congress, including you and your office, on these provisions.
Question. What are your views on ways to strengthen the American
Opportunity Tax Credit?
Answer. If confirmed, I will look forward to discussing with your
office your views on the American Opportunity Tax Credit.
Senator Brown asked Mr. Mnuchin to supply his views on a tax credit
that helps make college affordable for millions of students. Mr.
Mnuchin's response was to suggest an openness to discussing Senator
Brown's views on the subject at some point to be determined in the
future. Senator Brown is well-aware of his own views. He is not aware
of Mr. Mnuchin's and asked the question to gain some insight.
Amended Answer. The President and I are committed to help make
college more affordable. I'm sure we can agree that the tax code's
existing provisions in this area are confusing. We need to look at how
we can simplify and harmonize provisions that are designed to help
defray the costs of college. As we deal with tax reform, I look forward
to working with you to determine the best way to achieve our mutual
objective.
______
Prepared Statement of Hon. Ron Wyden,
a U.S. Senator From Oregon
Aside from the President, there may be no individual with a tighter
grasp on the levers of this country's economy than the Secretary of the
Treasury. That's been true since the days of Alexander Hamilton.
When you read about the nominee for Treasury Secretary, given all
the power that position holds, you hope not to see phrases like
``foreclosure machine,'' ``redlining,'' ``offshore funds,'' and
``predatory lending.''
I'm sure today's hearing will cover a wide range of matters,
whether it's Mr. Mnuchin's background and qualifications or the
incoming administration's policy agenda. I'll start with a topic that
cuts across all those matters: the truly disgusting inequity and abuse
of America's tax laws.
The tax code today is a tale of two systems. For wage earners like
cops and nurses, there are no special tax dodging strategies or
loopholes. The rules that apply to them are firm and involuntary. Once
or twice a month, their taxes come straight out of their paychecks, no
cutting corners.
The rules are different for the powerful and well-connected. They
have armies of lawyers and accountants at their disposal. With the
right advice, the most fortunate individuals in this country can decide
how much tax to pay and when to pay it.
Let's look at Mr. Mnuchin's history. There's no clearer example
than Mr. Mnuchin's hedge fund setting up outposts in Anguilla and the
Cayman Islands, an action that can be explained only by the islands'
zero-percent tax rate. It certainly wasn't for ease of commute or the
infrastructure. In Mr. Mnuchin's case, millions of dollars in profits
from Hollywood exports like the movie ``Avatar'' were funneled to an
offshore web of entities and investors.
When Mr. Mnuchin's bank was up for a merger that had the potential
to deliver a huge financial gain, a foundation he chaired reportedly
used tax-exempt dollars to fund an astroturfing campaign pushing for
the deal's approval. In the public comment period of a potential
merger, this is the equivalent of stuffing the ballot box.
Mr. Mnuchin also operates seven personal trusts, including one
known as a ``dynasty trust'' that will shield tens of millions of
dollars from taxes. In my view, if you look back in our history, this
Nation was founded to reward merit, not to perpetuate dynasties.
Now, as a nominee for a Cabinet position, Mr. Mnuchin could be in
line for a special, elective, Federal tax deferral on money made by
selling stocks and bonds. That is the very definition of getting to pay
what you want, when you want.
There's a common answer when these kinds of tax tricks come under a
spotlight. It's said that the people who use them are just following
the laws on the books, and that might be true.
The outrage in tax law is what's legal, and that every member of
the Senate has allowed it to stay legal. In my view, this outrage will
only change when taxpayers are no longer divided into two very
different sets of tax rules.
That provides a segue into important policy questions. Setting
aside Mr. Mnuchin's finances and background, the tax reform agenda
already being advanced by the incoming administration would
perpetuate--and in fact worsen--the unfairness in the tax code on the
books today.
On the campaign trail, the President-elect delivered lots of tough
talk about fixing the tax system. He said he alone could fix it because
he'd spent a career using the system to his advantage. As for the
details, the few tax reform position papers the President-elect's team
put forward didn't get much attention outside the business pages.
But just after Mr. Mnuchin's nomination was announced, he laid down
a clear and specific marker. I'll quote Mr. Mnuchin directly: ``Any
reductions we have in upper-
income taxes would be offset by less deductions, so there would be no
absolute tax cut for the upper class. . . .''
I'll repeat that last part, and for the sake of brevity, I'm going
to start calling it the Mnuchin Rule: ``. . . no absolute tax cut for
the upper class. . . .''
Let's take stock of what's already happening on Capitol Hill, even
before inauguration day. The first major act of the unified Republican
government, repealing the Affordable Care Act, would immediately
violate the pledge of no tax cuts for the wealthy. Bottom line, the ACA
repeal scheme that kicked off last week is a Trojan horse of tax breaks
for the most fortunate. It's paid for by taking tax benefits for health
insurance away from millions of working people.
Then it's back for round two later in the year, under an emerging
Republican plan to fast-track an even bigger tax break for the wealthy.
In my view, this is proof that the campaign promises about fixing the
tax system were just an elaborate head fake. For example, the
President-elect said he'd close the carried interest loophole, a
favorite of investment fund managers, but his plan actually gives them
a 25 percent tax cut. In fact, it slashes tax rates for corporations
and the wealthy across the board at a cost of trillions of dollars. So
it sounds like the Mnuchin Rule is already on the ropes.
What would the new administration's tax plan do for people of more
modest incomes? Millions of working Americans, mostly single parents,
would get hit with tax increases because they'd lose head of household
status when they file.
If you wanted to write a tax plan that would push even more
Americans out of the economic winner's circle, this is how you'd do it.
Given how central tax policy is to our jurisdiction, I hope the
committee is able to discuss those issues today. But of course the
Treasury Secretary and this committee handle a lot more than taxes, so
there are other concerns that need to be raised. On a broad level, it's
my view that Senators will have to make a judgment call about the sort
of individual they believe should lead the Treasury Department.
Mr. Mnuchin's career began in trading the financial products that
brought on the housing crash and the Great Recession. After nearly two
decades at Goldman Sachs, he left in 2002 and joined a hedge fund. In
2004, he spun off a hedge fund of his own, Dune Capital. It was only a
few lackluster years before Dune began to wind down its investments in
2008.
In early 2009, Mr. Mnuchin led a group of investors that purchased
a bank called IndyMac, renaming it OneWest. OneWest was truly unique.
While Mr. Mnuchin was CEO, the bank proved it could put more vulnerable
people on the street faster than just about anybody else around.
While he was CEO, a OneWest vice president admitted in a court
proceeding to ``robo-signing'' upward of 750 foreclosure documents a
week. She spent less than 30 seconds on each, and in fact, she had
shortened her signature to speed the process along. Investigations
found that the bank frequently mishandled documents and skipped over
reviewing them. All it took to plunge families into the nightmare of
potentially losing their homes was 30 seconds of sloppy paperwork and a
few haphazard signatures.
These kinds of tactics were in use between 2009 and 2014, a period
during which the bank foreclosed on more than 35,000 homes. ``Widow
foreclosures'' on reverse mortgages--OneWest did more of those than
anybody else. The bank defends its record on loan modifications, but it
was found guilty of an illegal practice known as ``dual tracking.'' One
bank department tells homeowners to stop making payments so they can
pursue modification, while another department presses on and hurtles
them into foreclosure anyway.
OneWest made only two loans to African American borrowers in 2014
and 2015, according to an analysis of Federal data by the California
Reinvestment Coalition. Just a fraction of its branches occupied
storefronts in minority communities, and none were in predominantly
African-American communities. But minorities still represented a
disproportionately large share of the people booted out of their homes.
Under Mr. Mnuchin, OneWest churned out foreclosures like Chinese
factories churned out Trump suits and ties. And with the combination of
extreme foreclosure tactics and a bailout from the FDIC, OneWest became
a rainmaker for Mr. Mnuchin and his fellow investors. At precisely the
same time the foreclosure machine was running, OneWest funds were
poured into glamorous investments in Hollywood.
In 2012, OneWest struck an agreement to loan hundreds of millions
of dollars to a movie studio called Relativity Media. In 2014, while he
was the CEO of OneWest's holding company, Mr. Mnuchin bought his own
stake in Relativity. He took a seat in the boardroom and was appointed
co-chairman. He even bought a private jet with Relativity's co-founder.
But the company quickly tanked. OneWest pulled out $50 million,
emptying several Relativity accounts, including one earmarked for guild
expenses that included wages for contractors and tradesmen. Mr. Mnuchin
bailed out just before the studio declared bankruptcy.
There have been press reports that the FBI has denied a Freedom of
Information Act request concerning Relativity Media, on the ground that
disclosure is likely to interfere with a pending law enforcement
proceeding. I have read the FBI background report on Mr. Mnuchin, and I
saw no discussion of any such enforcement action in the report. That
may be entirely appropriate, but I would like to continue to work with
the chairman to find out what the enforcement proceedings cited in the
FOIA denial are and how they relate to the nominee, if at all.
For Mr. Mnuchin, Relativity's failure wasn't much of a setback,
considering the profits that OneWest's foreclosure machine was still
pulling in. The purchase price of the bank in 2009 was less than $1.6
billion. After 5 years of foreclosures and profits, it sold for $3.4
billion to CIT Group.
Outside OneWest and Relativity, Mr. Mnuchin spent years as a
director of the holding company that owned Sears, an iconic American
brand. He served on the committee that watchdogged the Sears' employee
pension fund. The record shows the plan was routinely mismanaged and
underfunded.
Retirees recently saw their pensions cut, losing a monthly health
care stipend that was enough to offset roughly a third of the premiums
seniors pay for Medicare Part B. Sears has also shuttered hundreds of
stores nationwide over the last few years, and recently announced
another round of closures.
Once again showing his impressive capacity to advantage himself
while others fell behind, Mr. Mnuchin joined a small group of investors
that spun off the company's real estate into a separate trust. It was
arguably the most valuable asset Sears had left. So as retirees watch
their pensions shrink and Sears' remaining workers face an uncertain
future, this small number of powerful individuals made out fine.
As I wrap up, I want to step back for just a moment to talk about
the role of Secretary of the Treasury. The person who leads the
Treasury Department has influence over Americans' paychecks and
mortgages, the caliber of job opportunities they face, the safety and
stability of the financial system that holds and invests their hard-
earned dollars, and much more. They have the power to help reverse
decades of yawning inequality that have hollowed out the middle class,
dimmed the hopes of younger generations and left millions buried in
debt.
The Treasury Secretary ought to be somebody who works on behalf of
all Americans, including those who are still waiting for the economic
recovery to show up in their communities. When I look at Mr. Mnuchin's
background, it's a stretch to find evidence he'd be that kind of
Treasury Secretary.
That said, Mr. Mnuchin, I appreciate your willingness to serve and
answer questions before this committee, and I look forward to your
testimony.
______
Communications
----------
Computing Technology Industry Association (CompTIA)
515 2nd Street, NE
Washington, DC 20002
www.comptia.org
Thank you for the opportunity to express our views on this very
important subject. On behalf of the Computing Technology Industry
Association (CompTIA), I urge members of the Senate Finance Committee,
Secretary-designate Mnuchin, and the Congress as a whole to pursue
much-needed reforms to our corporate tax code.
CompTIA is the world's leading technology association, with
approximately 2,000 member companies, 3,000 academic and training
partners, over 100,000 registered users and more than 2 million IT
certifications issued. CompTIA's unparalleled range of programs foster
workforce skill's development and generate critical knowledge and
insight--building the foundation for technology's future.
A competitive tax policy that includes a lower rate, employs
territoriality, and incentivizes innovation and investment in the
United States, is critical for American technology companies to thrive
in the United States and the world. Our industry and many others are
constrained by an outmoded and complex federal tax code that is in need
of overhaul to reflect the dynamism of American ingenuity. The U.S.
corporate tax rate is among the highest in the industrialized world,
and of the countries that employ a territorial tax system, the U.S.
corporate rate is more than 50 percent higher (39 percent) than the
next ranking country (24 percent).
Our members support leveling the playing field both domestically and
internationally, seeking to eliminate the inequities of the current tax
code, including the ever-increasing costs associated with tax
compliance. Any corporate tax reform proposals must treat the
information technology industry equitably--both large companies, as
well as small and medium-sized businesses.
Specifically, CompTIA supports the following principles within the
broader context of corporate tax reform:
Lower the corporate tax rate to 25 percent. U.S. companies are
burdened with the highest corporate tax rate among OECD countries,
making them less competitive with their foreign competitors. We support
lowering the corporate tax rate to 25 percent, without increasing taxes
on small and medium-sized businesses.
Enact a territorial international tax system. The United States
is one of a handful of developed countries that taxes corporate
earnings on a global basis. This means that a U.S. company's foreign
earnings are subject to U.S. tax when repatriated, increasing the
foreign tax rate on these earnings to the U.S. rate. We support
enactment of a territorial international system that would remove the
punitive tax that prevents foreign earnings from be repatriated to the
United States.
Tax ``innovation box profits'' at a lower rate than the
corporate rate of 35 percent. We support policies that foster
innovation such as a ``patent box'' to attract and retain domestic
intellectual property development and ownership. A lower rate of
taxation on innovation would encourage companies to continue to
reinvest in domestic IP development while remaining competitive
globally.
Make the CFC look-through rule permanent. The territoriality
provisions of most other developed countries allow domestically based
companies operating abroad to structure their foreign operations
without the additional home country tax of the sort imposed by the U.S.
subpart F rules. In December 2015, the rule was extended through FY20
in the FY16 omnibus. Making the CFC look-through permanent would allow
U.S. based companies to marshal their capital outside the United States
in a way that would enable them to compete on a more level playing
field with their foreign competitors.
Tax repatriated profits at a lower rate. We support legislation
that incentivizes U.S.-based companies to reinvest profits back into
the United States by allowing those repatriated profits to be taxed at
a lower rate. Currently, companies are discouraged from repatriating
their profits because of the high corporate tax rate that would result.
The last major tax reform occurred in 1986. While many support reform,
congressional debate continues, and timing for action remains
uncertain. Such uncertainty hinders growth. The United States has long
been the global hub for innovation, but absent broad, commonsense
reforms to our tax code, innovation, job, and economic growth could all
be stifled, threatening our position as the global leader.
CompTIA welcomes this opportunity to offer our perspective on this
issue and others facing the IT industry and nation. The information,
communication, and technology sector is one of the largest industry
sectors in the U.S. economy. The market is $3.7 trillion globally, and
$ 1 trillion in the United States, employing approximately 5.7 million
Americans. To put it into perspective, the gross output of the
technology sector exceeds that of the legal services industry, the
automotive industry, the airline industry, the motion picture industry,
the hospitality industry, the agriculture industry, and the restaurant
industry, just to name a few examples (source: U.S. Bureau of Economic
Analysis).
The technology industry not only helps drive economic growth in a
multitude of ways, but it continues to significantly enrich how we
live, work, and play. We stand ready to work with you, and I am happy
to address any questions you may have.
Respectfully,
Elizabeth Hyman
Executive Vice President, Public Advocacy
______
Letter Submitted by Mike Jones
U.S. Senate
Committee on Finance
Dirksen Senate Office Building
Washington, DC 20510-6200
To Whom it May Concern:
I am writing you as an American citizen and a citizen of Nevada
where the housing crisis hit us the hardest to plead with you not to
confirm Steven Mnuchin as Treasury Secretary.
The 2007-2008 economic crash was a scary time in Nevada. The last
person we need in charge of Treasury is someone whose greed and
coldness contributed to this.
This man is known as the ``Foreclosure King'' for a reason, and
considering our state suffered from mass foreclosures more than just
about anyone, a vote to confirm him is a slap in the face to the people
of Nevada and across the country who fell on hard times during this
crisis.
A man who would foreclose on an elderly women over being 27 cents
short on her mortgage payment is not someone who cares about the
struggles of the average American.
Donald Trump campaigned to ``drain the swamp,'' and he used Goldman
Sachs as his punching bag against Ted Cruz and Hillary Clinton. Where
does he get any sort of justification to name the number two man at
Goldman Sachs as the person in charge of the economy?
If you can't see that this is setting us up for another global
financial collapse, unfortunately I feel that you will realize it
eventually. When it is too late.
Please Senators, do the right thing now and vote to stop this
nomination in its tracks.
Thank you for your service.
Sincerely,
Mike Jones
______
Letter Submitted by Erica Helm Meade
U.S. Senate
Committee on Finance
Dirksen Senate Office Building
Washington, DC 20510-6200
Dear Senators,
I strongly urge you to oppose the nomination of Steven Mnuchin for
Treasury Secretary, because appointing him would be the opposite of
what President-elect Trump promised to do: rid the government of pay-
to-play politics.
Mr. Mnuchin is a Wall Street mogul who has, through predatory lending
and aggressive foreclosures, enriched himself and his colleagues at
devastating expense to ordinary families, seniors, and working-class
communities. As Treasury Secretary, I expect he would institutionalize
the same abuses, further damaging our society and economy. This is the
opposite of Mr. Trump's promise to ``drain the swamp'' of bad actors
and their self-serving practices that harm so many.
Please oppose this nomination.
Thank you most kindly for your attention.
Sincerely,
Erica Helm Meade
______
Letter Submitted by Jan Tomassone-Bach
January 27, 2017
U.S. Senate
Committee on Finance
Dirksen Senate Office Bldg.
Washington, DC 20510-6200
To the honorable members of the Senate Committee on Finance:
I watched the hearing held on January 19, 2017, to consider the
nomination of Steven Mnuchin. The vast amount of evidence presented by
many committee members exposed his unethical practices and self-serving
behavior leaving in his wake thousands of individuals and families in
total ruins and devastation. I truly believe Mr. Mnuchin should not be
nominated to be Secretary of the Treasury.
We need to be protected from people like him. He is not the man to hold
one of the most important offices in the Nation. He didn't follow the
rules and failed in providing the highest standard of care when he ran
businesses, banks, investments, and pensions. With all due respect,
what makes you think he'll be any different just because he says he
will? His past actions speak louder than his words. They were border-
line criminal. Oh, but I forget, his weren't as bad as the other
criminals. Has he really repented?
Based on the millions and millions of dollars he left out of his
disclosure, then blaming someone else for bad advice, and using the
excuse that the forms were overwhelming even for him, doesn't pass the
smell test. The ``I didn't know'' excuse is exactly what we heard from
the executives who created the financial crises in 2007-2008 and
recently the Wells Fargo CEO. Today they are personally richer than
ever yet the public bailed out their institutions. Couldn't he or his
advisor have picked up the phone and asked about including his real
estate holdings? Wasn't it important enough?
When I was 18 and applied for a secretarial job at United Airlines
headquarters after already working there with great reviews, as a temp,
my application was declined because I listed August 8, 1975 as my high
school graduation date. It was an honest mistake, but I didn't get the
job because the head of HR said I lied. I cried like a baby. I can
blame it on the fact that it was my first real job application, I was
only 18 and in a hurry, and that the head of HR didn't like it that the
department head offered me the job before going to HR. Bottom line, I
didn't get the job because of this error. Why should the standards for
the Secretary of the Treasury be any less? They aren't any less for
you, are they?
Again, with all due respect, I have made some snarky remarks, but as my
Mom used to say, if it looks like a duck, swims like a duck, and quacks
like a duck, then it's probably a duck! I firmly believe that he will
blindside all of you and the President, resulting in a devastating
effect on our economy and economies across the globe. Please, I implore
all of you, do not nominate Mr. Mnuchin.
Thank you for your consideration, dedication, and commitment to your
office and the people of the United States.
Sincerely,
Jan Tomassone-Bach
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